How much tax do landlords pay in the UK?
How much tax do landlords pay in the UK? Rental profit is added to your other income and taxed at 20/40/45%, with no National Insurance. Worked examples inside.
Quick answer: There is no separate "landlord tax rate." Your rental profit is added to your other income (salary, pension, self-employment) and taxed at the normal Income Tax rates — 20%, 40% or 45% for 2025/26 and 2026/27 — with no National Insurance on rental profit. To see which band your total income falls into, try the self-employed tax calculator.
If you let out UK property, the amount of tax you pay depends on your rental profit (rent received minus allowable expenses) and, crucially, on all your other income. Rental profit doesn't have its own set of rates the way, say, dividends do — it's stacked on top of your other taxable income and taxed at whatever Income Tax band that pushes it into. Below we walk through the rates, the reliefs that reduce your bill, and two worked examples at £12,000 and £30,000 of gross rent.
Rental profit is added to your other income
The tax you pay is on profit, not on the rent you collect. Your profit is your gross rents for the year, less the expenses you're allowed to deduct (letting agent fees, insurance, repairs, and so on — see our allowable expenses guide).
That profit figure is then added to your other income for the year. HMRC works out your Income Tax on the whole lot together, applying your Personal Allowance and the bands in order. For 2025/26 and 2026/27 the Income Tax rates and Personal Allowance are:
| Band | Taxable income (2025/26 & 2026/27) | Rate on that slice |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The Personal Allowance (£12,570) and the higher-rate threshold (£50,270) are frozen until April 2028, per HMRC's personal allowance and thresholds note. (Scotland has its own bands for non-savings income; the figures here are for the rest of the UK.)
Heads-up for 2027/28 onwards: the government has announced that property income will get its own slightly higher rates — 22% / 42% / 47% — from 6 April 2027, a 2-percentage-point uplift over the standard bands. See HMRC's technical note on property, savings and dividend rates. For 2025/26 and 2026/27, though, the normal 20/40/45% rates apply to rental profit.
No National Insurance on rental profit
Renting out property is not treated as a trade, so Class 2 and Class 4 National Insurance do not apply to rental profit. This is a genuine difference from being self-employed: a sole trader pays Class 4 NIC (6% main rate in 2026) on top of Income Tax, but a landlord with only rental income does not.
(The narrow exception: if being a landlord genuinely amounts to running a business — for example, if it's your main occupation across several properties — you may be able to pay voluntary Class 2 NIC to protect your State Pension record. That's a choice you make to build contributions, not a charge HMRC imposes. See renting out a property: paying tax and National Insurance.)
The £1,000 property allowance
If your gross property income for the year is £1,000 or less, it's tax-free and you generally don't need to report it at all. If it's more than £1,000, you can choose either to:
- deduct your actual allowable expenses, or
- deduct the £1,000 property allowance instead (useful when your real expenses are small).
You can't do both. For a landlord with meaningful mortgage-free costs and low expenses, the flat £1,000 can beat itemising. See HMRC's tax-free allowances on property and trading income. If you own a property jointly, each owner gets their own £1,000 allowance against their share of the gross rent.
Section 24: mortgage interest is no longer a deduction
If you have a residential buy-to-let mortgage, be careful. Since 2020/21, finance costs (mortgage interest) are not deducted from your rental profit. Instead you get a basic-rate (20%) tax reducer on those finance costs. That means higher-rate landlords no longer get 40% relief on their interest — everyone gets 20%.
The practical effect: your taxable profit looks higher (because interest isn't subtracted), and then a 20% credit is knocked off your final tax bill. For a higher-rate taxpayer this can substantially increase the effective tax on a leveraged property. We explain the mechanics and a full worked example in our section 24 guide. (This applies to residential lettings; commercial property interest is still fully deductible.)
Worked example 1 — £12,000 gross rent, basic-rate landlord
Priya has a job paying £30,000 and lets one flat for £12,000 a year. Her allowable expenses (letting agent, insurance, safety checks, minor repairs) come to £3,000. She has no mortgage on the flat.
| Step | Amount |
|---|---|
| Gross rent | £12,000 |
| Less allowable expenses | (£3,000) |
| Rental profit | £9,000 |
| Her salary already uses her £12,570 allowance and sits in basic rate | — |
| Rental profit taxed at basic rate (20%) | £9,000 × 20% = £1,800 |
| National Insurance on rental profit | £0 |
Because her salary plus £9,000 profit (£39,000 total) stays under £50,270, all the rental profit is taxed at 20%. Tax on the rental: £1,800.
Worked example 2 — £30,000 gross rent, tipping into higher rate
Tom earns £40,000 in his job and receives £30,000 gross rent across two flats. Expenses are £6,000, and he has £5,000 of mortgage interest on a residential BTL.
| Step | Amount |
|---|---|
| Gross rent | £30,000 |
| Less allowable expenses (excluding mortgage interest) | (£6,000) |
| Rental profit (interest not deducted — section 24) | £24,000 |
| Salary | £40,000 |
| Total income | £64,000 |
His £64,000 total means the top slice of his income crosses into higher rate (over £50,270). Roughly, the first ~£10,270 of his rental profit is taxed at 20% and the remainder at 40%:
| Slice of rental profit | Rate | Tax |
|---|---|---|
| ~£10,270 (fills basic-rate band) | 20% | ~£2,054 |
| ~£13,730 (higher rate) | 40% | ~£5,492 |
| Income Tax on rental profit (before credit) | ~£7,546 | |
| Less section 24 credit: £5,000 interest × 20% | (£1,000) | |
| Net tax on the rental | ~£6,546 |
No National Insurance is due. Note how the £5,000 of mortgage interest only saves him £1,000 in tax (20%), not £2,000 — that's section 24 in action. These figures are illustrative; your exact split depends on your precise other income. Run your own numbers with the self-employed tax calculator (the Income Tax bands are identical), then read the section 24 guide if you're geared.
Do you also need Making Tax Digital?
From April 2026, landlords whose gross rents plus any self-employment turnover exceed £50,000 must keep digital records and send quarterly updates to HMRC. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. This is separate from how much tax you pay — it's about how you report it. Check where you stand with the MTD scope checker and see our MTD for landlords guide for the full timeline.
This guide is general information, not personalised tax advice. Ledgers is software that helps landlords keep digital records, track allowable expenses, and see their likely tax as the year goes — but for a bespoke position, speak to an accountant.
Frequently asked questions
Do landlords pay National Insurance on rental income?
No. Rental profit is not treated as trading income, so neither Class 2 nor Class 4 National Insurance applies. The only exception is if you choose to pay voluntary Class 2 contributions because your letting activity amounts to a genuine business — that's optional and used to protect your State Pension, not a charge HMRC imposes.
What tax rate do landlords pay?
There's no special landlord rate for 2025/26 or 2026/27 — rental profit is added to your other income and taxed at 20%, 40% or 45% depending on your total. From 6 April 2027, HMRC introduces dedicated property rates of 22%, 42% and 47%, a 2-point uplift over the standard bands.
Can I earn some rent tax-free?
Yes. If your gross property income is £1,000 or less in a tax year it's covered by the property allowance and usually doesn't need reporting. Above £1,000 you can deduct either the £1,000 allowance or your actual expenses — whichever is more generous — but not both.
Why can't I deduct my mortgage interest any more?
For residential lettings, section 24 replaced the interest deduction with a basic-rate (20%) tax reducer from 2020/21. Your interest no longer reduces taxable profit; instead 20% of it is knocked off your final tax bill, which typically costs higher-rate landlords more. See our section 24 guide.
How do I work out my exact tax bill?
Add your rental profit to all your other taxable income, apply your £12,570 Personal Allowance, then tax each slice at the band it falls into (20/40/45%). Deduct any section 24 credit at the end. The self-employed tax calculator uses the same Income Tax bands and gives you a quick estimate.