UK Landlord Tax: The Complete Guide to Rental Income, Allowable Expenses, and Section 24

Published April 2026 · 11 min read · By Solofold

Rental income tax is straightforward in principle and complicated in practice. The principle: you pay income tax on your rental profit after allowable expenses. The complication: what counts as an allowable expense, how Section 24 changes the calculation for anyone with a mortgage, and what records HMRC actually needs to see.

This guide covers all three. It's aimed at UK residential landlords with one or a small number of properties who file a Self Assessment tax return and want to understand what they're doing and why.

How rental income tax works

As a UK landlord, you pay income tax on your rental profit — that is, your total rental income minus your allowable expenses. Your rental profit is added to your other income (employment, pension, self-employment) and taxed at the relevant rate.

For 2025-26, the rates are: 0% on income within the personal allowance (£12,570), 20% on income from £12,571 to £50,270 (basic rate), 40% on income from £50,271 to £125,140 (higher rate), and 45% on income above that. Most smaller landlords will pay at 20% or 40% depending on their total income from all sources.

What counts as an allowable expense

Allowable expenses reduce your rental profit and therefore your tax bill. HMRC allows the following for residential landlords:

Rent, rates and insurance. Ground rent, council tax paid when the property is vacant, and building and contents insurance for the rental property are all allowable. Service charges for leasehold properties are also included here.

Property repairs and maintenance. Repairs that restore the property to its original condition are allowable — replacing a broken boiler, repairing a roof, redecorating between tenants. Improvements that add value above the original standard are capital expenditure and not allowable as a revenue expense (though they may reduce Capital Gains Tax when you sell).

Professional fees. Accountant fees, solicitor fees for tenancy agreement review, and letting agent management fees are all allowable. One-off legal fees to buy or sell the property are not — those are capital costs.

Costs of services. Cleaning, gardening, pest control, and other services you provide to tenants are allowable. Letting agent fees (both the initial letting fee and ongoing management fees) fall here.

Other allowable expenses. Advertising costs to find tenants, stationery, postage, and other administrative costs. Travel costs to the property are allowable for inspections and maintenance visits — but not if your primary purpose is something else.

Section 24: the mortgage interest restriction explained

Before April 2017, landlords could deduct mortgage interest directly from their rental income before calculating their tax bill. This meant a landlord paying £12,000 in mortgage interest on a property generating £18,000 in rent would only pay tax on £6,000 of profit.

Section 24 changed this. Since April 2020, when the transition period fully ended, landlords can no longer deduct mortgage interest from rental income. Instead they receive a 20% tax credit on their finance costs — which is worth considerably less for higher-rate taxpayers.

The impact is greatest for higher-rate taxpayers. For basic-rate taxpayers, the change is neutral — the 20% tax credit matches the 20% rate they would have paid anyway. For anyone paying 40% tax, the restriction is a significant additional cost that must be factored into how they think about rental yield.

Record-keeping: what HMRC expects

HMRC requires you to keep records of all rental income and expenses for at least five years after the 31 January Self Assessment deadline for the relevant tax year. If your return is filed late, the period is longer.

For income, you should keep: rent books or receipts, bank statements showing rent received, and any written tenancy agreements. For expenses, you need receipts or invoices for every claim — HMRC can ask to see them if your return is selected for review.

The key principle is that your records need to clearly show what money came in, what went out, and that every expense was genuinely for the rental business. Bank statements support the amounts; invoices support the purpose.

Payments on Account for landlords

If your rental income tax bill is more than £1,000, HMRC will ask you to make advance payments towards next year's bill — called Payments on Account. These are due on 31 January and 31 July each year, each for 50% of the previous year's tax bill.

New landlords often get caught out by this in their second year of letting. In year one you pay the tax due by 31 January. In year two you pay the tax due plus the first two Payments on Account — effectively 200% of year one's bill at once. The Solofold free rental tax calculator gives you an estimate so you can plan for this.