What Tax Do Landlords Pay in the UK?

Which taxes apply to a rental property?

Eight taxes can touch a UK rental property, though no landlord pays all of them in the same year. Which ones apply depends on whether you are buying, holding, selling or passing the property on.

The tax-by-tax summary for 2026-27

HMRC’s guidance on paying tax when you rent out a property covers the reporting side. The table below is the rate side, as it stands for the 2026-27 tax year.

Only income tax and, in some years, council tax are annual. The rest are triggered by an event: a purchase, a sale or a death.

Which tax year these figures apply to

The 2026-27 tax year runs from 6 April 2026 to 5 April 2027, and every rate quoted here is the one in force during it.

All your UK rentals count as a single property business, so profits and losses are pooled before tax is worked out. Landlords insured on a multi-property policy still file one set of property figures, not one per house.

How is rental income taxed in 2026-27?

Rental profit is added to your other income and taxed at your marginal rate of 20%, 40% or 45% in England, Wales and Northern Ireland. You are taxed on profit after allowable expenses, not on the rent you bank.

The bands your rental profit sits on

Rental profit goes on the property pages of your Self Assessment return, due by 31 January after the tax year ends. It stacks on top of salary, pension and any other non-savings income.

The personal allowance falls by £1 for every £2 of income above £100,000 and runs out at £125,140. The allowance and the £50,270 higher rate threshold are frozen until 5 April 2031, so rising rents pull more landlords into 40% every year.

The £1,000 property allowance

The first £1,000 of gross property income is tax free under the property allowance. Claim it and you give up the right to deduct any expenses at all.

It suits someone letting a garage, not a landlord running a mortgaged flat. Once your real costs pass £1,000, claiming expenses always wins.

What you can deduct before tax

An expense has to be wholly and exclusively for the letting. Repairs that restore the property qualify, improvements that upgrade it do not.

• Landlord buildings insurance, contents and liability premiums, including the 12% Insurance Premium Tax charged inside them.
• Rent guarantee insurance, deductible in the tax year the premium is paid.
• Legal expenses cover, letting agent fees, accountancy fees and the cost of drawing up a tenancy agreement.
• Ground rent and service charges on a leasehold flat, including the share of the block of flats insurance recharged to you.
• Replacement of domestic items relief on a like-for-like swap of a sofa, carpet, fridge or bed, though not on the first one you buy.
• Repairs that put the property back as it was: a same-spec boiler, repainting, a replacement cracked window, a re-fixed roof tile.

Insurance is one of the few landlord costs Section 24 leaves alone, so it comes off in full. What landlord insurance costs depends far more on the property and the tenancy than on the tax treatment.

Losses carry forward against future profits of the same property business and cannot be set against your salary. A payout under loss of rent cover works the other way and counts as rental income in the year you receive it.

How much does section 24 add to your bill?

Section 24 stops individual landlords deducting mortgage interest from rental income and gives a 20% tax credit instead. Basic rate taxpayers end up where they started, higher rate taxpayers lose half their old relief.

How the finance cost credit is worked out

You work out the profit with no deduction for interest, tax it, then take off 20% of the finance costs. The restriction covers buy-to-let mortgage interest, overdraft interest and the fees for arranging or repaying the loan.

The credit is 20% of the lowest of three figures: the finance costs, the property profits, and your income above the personal allowance. That cap catches landlords whose interest bill runs ahead of their profit.

A basic rate and a higher rate landlord compared

Both landlords below take £18,000 of rent, pay £8,000 of mortgage interest and £3,600 of other allowable costs. The only difference is the band their property profit falls into.

The basic rate landlord pays 20% of real profit, exactly as before the restriction. The higher rate landlord hands over £4,160 on £6,400 of genuine profit.

The £100,000 trap section 24 can push you into

Because interest no longer reduces your profit figure, it no longer reduces your adjusted net income either. A landlord on £92,000 of salary with £14,400 of pre-interest property profit lands at £106,400.

That costs £3,200 of personal allowance and £1,280 of extra tax, a 60% marginal rate on the slice above £100,000. Under the pre-2017 rules the same landlord would have stayed below the threshold on £98,400.

Do landlords pay national insurance on rental income?

No, in almost every case. Rental profit is investment income, and National Insurance only bites if HMRC treats your letting as a trade.

When letting counts as a trade

HMRC asks whether you are gainfully employed as a landlord: whether letting is your main job, whether you run more than one property, and whether you are buying more to let out. Cross that line and Class 2 and Class 4 contributions come into play.

Serviced accommodation and short-stay letting with hotel-style services are the usual borderline cases, which is also why they need Airbnb cover rather than a standard let policy. A conventional HMO let on assured tenancies stays investment income.

Voluntary contributions and your pension record

Class 2 contributions are voluntary for landlords, and paying them buys a qualifying year towards the state pension. Landlords with no employment income and a thin contribution record are the ones who gain.

The government ruled out a National Insurance charge on rental income at the Autumn Budget 2025.

What do you pay when you buy and when you sell?

Stamp duty on the way in, capital gains tax on the way out. A landlord buying an additional property pays a 5% surcharge on the whole price, then 18% or 24% on any gain when it sells.

Stamp duty and the 5% additional property surcharge

The surcharge applies to any residential purchase of £40,000 or more where you already own a share in another home anywhere in the world. HMRC’s stamp duty land tax guidance sets the bands, and the 5% rate has applied since 31 October 2024.

Six or more dwellings bought in one transaction fall into the non-residential rates instead, as do mixed-use buildings such as a shop with a flat above that needs commercial property insurance. Both routes sidestep the surcharge.

Capital gains tax on disposal

Residential gains are taxed at 18% inside the basic rate band and 24% above it, against an annual exempt amount of £3,000. The gov.uk capital gains tax guidance confirms both figures for 2026-27.

A let property gets no private residence relief for any period you did not live in it. Deduct the purchase price, the stamp duty you paid, legal and agent fees and the cost of capital improvements.

The 60-day reporting deadline

You report and pay the tax within 60 days of completion through a Capital Gains Tax on UK property account. The disposal then goes on your Self Assessment return as well, with the 60-day payment credited against it.

Late filing brings an automatic £100 penalty and late payment runs at 7.75%, the rate set on 9 January 2026 at base rate plus four points. Spouses and civil partners can move a share before exchange and use two annual exemptions.

What changes if you hold the property in a company?

A company deducts 100% of its mortgage interest and pays corporation tax at 19% to 25% rather than income tax. The catch is the cost of moving an existing portfolio in, and the second layer of tax on taking money back out.

Corporation tax rates and marginal relief

Profits up to £50,000 are taxed at 19% and profits above £250,000 at 25%, with marginal relief tapering the rate between the two. Both limits are divided by the number of associated companies, so three property companies get £16,667 each at the small profits rate.

A company letting to unconnected tenants is not a close investment-holding company, so it keeps the 19% rate on small profits. Portfolio landlords running several companies are the ones most likely to lose the benefit of it.

The cost of moving an existing portfolio across

Selling a property you own personally into your own company is a disposal at market value, so capital gains tax falls due at 18% or 24%. The company then pays stamp duty at the additional property rates on the same value.

Incorporation relief can defer the gain where the letting is run as a genuine business, but it turns on the facts. Buying through a company from the start avoids both charges.

The April 2027 property income rates do not apply to companies, which widens the gap again for higher rate landlords. Dividends taken back out are taxed at 10.75% and 35.75% from April 2026.

How much does inheritance tax take from a portfolio?

Rental property is taxed at 40% above the nil rate bands, with no business property relief because letting counts as holding investments. A £600,000 portfolio inside a £1m estate can leave a six-figure bill.

Nil rate bands and why lettings miss the relief

The nil rate band is £325,000 and the residence nil rate band adds up to £175,000 on top. The residence band only covers a home left to children or grandchildren, so a rental property never qualifies for it.

Business property relief does not reach an ordinary letting business either. Holiday lets lost the last of their edge when the furnished holiday lettings regime ended on 6 April 2025.

Joint ownership and spouse transfers

Anything left to a spouse or civil partner passes free of inheritance tax and carries the unused nil rate band across. A couple can pass on up to £1m before tax if a main home goes to their children.

Gifting a rental property to a child is a disposal for capital gains tax and a potentially exempt transfer for inheritance tax. You need to survive seven years for the gift to drop out of the estate.

What is different in Scotland and Wales?

Scotland taxes rental profit through six bands topping out at 48% and charges an 8% Additional Dwelling Supplement instead of the stamp duty surcharge. Wales matches the UK income tax rates but runs its own higher rates of Land Transaction Tax.

Scottish income tax on rental profit

A Scottish taxpayer pays Scottish rates on rental profit because it counts as non-savings income. The higher rate starts at £43,663 rather than £50,271, so Scottish landlords reach 42% about £6,600 of income earlier.

The Scottish Budget for 2026-27 held every Land and Buildings Transaction Tax rate and band at its existing level. That includes the Additional Dwelling Supplement.

Purchase taxes across the three systems

Capital gains tax, inheritance tax and corporation tax work the same way across the UK. Only income tax and the tax on purchase differ by nation.

What tax changes are coming before april 2028?

Three dates matter. Making Tax Digital widens in April 2027, property income rates rise by two points on 6 April 2027, and a council tax surcharge on £2m homes starts in April 2028.

The two point rise in property income rates

From 6 April 2027 property income gets its own rates of 22%, 42% and 47%, two points above the main rates. Salary and pension income stay on 20%, 40% and 45%.

The change was announced at the Autumn Budget 2025 for England, Wales and Northern Ireland, and the government has said it will give Scotland and Wales the power to set their own property income rates. It does not affect your 2026-27 return.

On £14,400 of taxable property profit a higher rate landlord pays about £288 more a year, and past £1,000 across a four-property portfolio.

Making tax digital thresholds and dates

Making Tax Digital for Income Tax applies from 6 April 2026 to landlords whose qualifying income from property and self-employment topped £50,000 in 2024-25. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

Qualifying income is gross rent before expenses, not profit, which pulls in more landlords than they expect. You file four quarterly updates and one final declaration in place of the old single return.

The council tax surcharge on £2m homes

From April 2028 owners of English residential property valued at £2m or more pay a High Value Council Tax Surcharge on top of the normal council tax. It falls on the owner, so a let property is caught even though the tenant pays the standard bill.

Between tenancies the council tax bill usually reverts to you, and many councils add a premium once a home has stood empty for a year. That is also the point at which a standard policy pulls cover back and you need unoccupied property insurance.