Rental Income Tax Calculator UK

Rental income from buy-to-let properties is added to your other income and taxed at your marginal rate of Income Tax. Since the Section 24 changes were fully phased in from April 2020, individual landlords can no longer deduct mortgage interest as an expense. Instead, they receive a 20% tax credit on finance costs, which significantly increases the tax bill for higher-rate taxpayers and can even push basic-rate taxpayers into the higher band.

Before Section 24, a higher-rate landlord with £1,000/month rent and £700/month mortgage interest paid tax on £300 profit (£120 at 40%). Now they pay tax on the full £1,000 income (£400 at 40%) minus a 20% credit on £700 (£140), leaving a tax bill of £260 — more than double. This change fundamentally altered the economics of leveraged buy-to-let for individual landlords and is why many have incorporated or sold properties. Companies are not affected by Section 24 and can still deduct mortgage interest in full.

How to Use This Calculator

1. Enter your annual rental income (gross rent received)
2. Add allowable expenses (letting agent fees, repairs, insurance, ground rent, service charges)
3. Enter your mortgage interest payments separately (for Section 24 credit calculation)
4. Input your other taxable income (salary, dividends, pensions) to determine your marginal rate
5. View the tax due, the Section 24 credit, and your true net profit from the property

Key Facts

Allowable expenses include letting agent fees, repairs and maintenance (not improvements), building insurance, ground rent, service charges, accountancy fees, and travel to the property. You can claim a £1,000 property income allowance instead of actual expenses if that gives a better result. Capital Gains Tax applies when you sell at 18% or 24%, and the 60-day reporting deadline means you need your figures ready before completion. Furnished Holiday Lets lost their special tax status from April 2025, now taxed as standard rental income.