The UK buy-to-let tax landscape was transformed by Section 24 — landlords can no longer deduct mortgage interest directly from rental income. Instead, they receive a 20% tax credit on finance costs. Higher-rate taxpayers pay significantly more tax under this regime.
Your rental profit = gross rent minus allowable expenses (letting agent fees, insurance, repairs, accountancy), with a 20% mortgage interest credit applied. For 2026/27, buy-to-let purchases attract a 3% SDLT surcharge.
Being a landlord involves more than just collecting rent — you need to understand the tax implications of your property investments. This calculator works out your rental income tax, taking into account mortgage interest restrictions, allowable expenses, stamp duty surcharges, and the various reliefs available to property investors.
Rental profits are added to your other income and taxed at your marginal Income Tax rate. You calculate profits by taking your total rental income and subtracting allowable expenses. Allowable expenses include mortgage interest (with restrictions), letting agent fees, landlord insurance, maintenance and repairs, council tax and utility bills (if paid by you), and accountancy fees.
Since April 2020, landlords can no longer deduct mortgage interest from rental income before tax. Instead, you receive a 20% tax credit on your mortgage interest payments. This change disproportionately affects higher rate taxpayers. A landlord with £20,000 rental income and £8,000 mortgage interest previously deducted the full £8,000. Now they pay tax on the full £20,000 and receive a £1,600 tax credit (20% of £8,000).
For a higher rate taxpayer, this means paying 40% on the £8,000 (£3,200) but only getting £1,600 back — an effective extra tax cost of £1,600 per year. Read our full Section 24 guide to understand the impact and strategies to mitigate it.
Properties that qualify as Furnished Holiday Lettings receive preferential tax treatment. You can claim full mortgage interest relief (unlike standard buy-to-let), claim capital allowances on furniture and equipment, and qualify for Capital Gains Tax reliefs including Business Asset Disposal Relief. To qualify, the property must be available for letting at least 210 days a year and actually let for at least 105 days.
| Property Value Band | Standard Rate | + 3% Surcharge | Total BTL Rate |
|---|---|---|---|
| Up to £125,000 | 0% | 3% | 3% |
| £125,001 – £250,000 | 2% | 3% | 5% |
| £250,001 – £925,000 | 5% | 3% | 8% |
| £925,001 – £1.5m | 10% | 3% | 13% |
| Over £1.5m | 12% | 3% | 15% |
Non-UK residents pay an additional 2% surcharge on top of the 3% additional property rate. First-time buyers purchasing under £425,000 pay 0% on the first £425,000 (if not an additional property).
| Tax Band | CGT Rate (Property) | Applies To |
|---|---|---|
| Basic Rate taxpayer | 18% | Gain falling within unused basic-rate band |
| Higher / Additional Rate | 24% | Gain exceeding basic-rate band |
| Annual Exempt Amount | £3,000 | Tax-free gain per individual |
You must report and pay CGT on UK residential property within 60 days of completion. Letting Relief may apply if you previously lived in the property and let it out, but it is now heavily restricted.
Section 24 of the Finance Act 2015 fundamentally changed how residential landlords account for mortgage interest. Before April 2017, you could deduct mortgage interest from rental income before calculating tax. Now, you receive only a 20% tax credit on your mortgage interest payments.
This has two major consequences:
For example, a landlord with £20,000 rent, £8,000 expenses and £6,000 mortgage interest used to have a taxable profit of £6,000. Under Section 24, the taxable profit is £12,000, with a £1,200 tax credit (20% of £6,000). If that landlord also earns £45,000 in salary, the extra £6,000 of "phantom" profit is taxed at 40%, not 20%.
Gross yield is simply annual rent divided by property value. It is useful for quick comparisons but tells you nothing about profitability.
Net yield accounts for all costs (excluding mortgage capital repayments) and gives you the real cash-on-cash return. Our calculator shows both:
A property showing 6% gross yield might only deliver 2–3% net yield after Section 24 tax, maintenance voids, and management fees. Always model the net figure before buying.
No. Only the interest portion was ever deductible, and since Section 24 even that is restricted to a 20% tax credit. Capital repayments are never an allowable expense — they reduce your loan balance, not your tax bill.
It depends on your tax bracket and plans. Companies pay 25% Corporation Tax but can deduct mortgage interest fully. However, extracting profits via salary or dividends triggers personal tax. For higher-rate taxpayers with several mortgaged properties, a company structure often wins. Seek advice from a property tax specialist.
Allowable expenses include: letting agent fees, landlord insurance, maintenance and repairs, safety certificates (Gas, EICR, EPC), ground rent, service charges, council tax during voids, advertising for tenants, mileage to visit the property, and a proportion of phone/internet use. You cannot claim for capital improvements (e.g., extensions) — these reduce your CGT instead.
Rental income is declared via Self Assessment. The deadline for online filing is 31 January following the end of the tax year (5 April). If your tax bill is over £1,000, you will usually make Payments on Account on 31 January and 31 July.
All calculations are verified against official HMRC thresholds and rates for the 2026/27 tax year. Figures are updated within 24 hours of any HMRC announcement. Calculations are for guidance only — consult a qualified accountant for personalised advice.