Enter your rent, running costs and mortgage interest, and we'll work out the tax on your rental profit at your marginal rate — including the 20% mortgage interest tax credit that catches out so many higher-rate landlords.
Profit at your marginal rate
Your rental profit is the rent you receive minus allowable expenses — letting agent fees, repairs, insurance, ground rent and so on. That profit is added to your other income and taxed at your marginal rate. The catch since the Section 24 reforms is that mortgage interest is no longer an expense. Instead, your final tax bill is reduced by a credit worth 20% of the interest you paid.
| Item | Treatment |
|---|---|
| Repairs, agent fees, insurance | Fully deductible |
| Mortgage interest | 20% tax credit only |
| Capital improvements | Not against income (CGT) |
| £1,000 property allowance | Alternative to expenses |
When you eventually sell, Capital Gains Tax applies on the gain. Check the rental return itself on the rental yield calculator, the purchase tax on the second home stamp duty calculator, and your overall income position on the income tax calculator.
Profit (rent minus expenses) is added to your other income and taxed at 20%, 40% or 45%. Mortgage interest gets a 20% credit, not a deduction.
No — since Section 24 it's a 20% tax credit instead, which hits higher-rate landlords hardest.
Rental income up to £1,000 is tax-free; above that you can deduct the £1,000 instead of actual expenses if it's better.
Generally no — rental income from ordinary property letting isn't subject to NI, only Income Tax.
