How it works
- Rental profit = rent − allowable expenses. Mortgage interest is not deducted. If the £1,000 property allowance gives a lower bill, the calculator uses that instead (you can't then claim expenses or the mortgage interest reduction).
- Personal allowance of £12,570, reduced by £1 for every £2 of income over £100,000. It is set against your other income first, then rental profit.
- Tax bands: other income fills the bands first and rental profit sits on top. In England and Northern Ireland from 6 April 2027 rental profit is taxed at the new property income rates of 22%, 42% and 47% (Finance Act 2026). In 2026/27 it is taxed at 20%, 40% and 45% like other income. Scotland uses its own six bands (19%–48%) for 2026/27.
- Mortgage interest restriction: instead of a deduction you get a tax reduction of 20% (2026/27) or 22% (2027/28) of the lowest of your finance costs (plus any brought forward), your rental profit, and your income above the personal allowance. Anything unused is carried forward.
Worked example
England. Salary £30,000; rent £15,000; expenses £3,000; mortgage interest £5,000. Rental profit is £12,000.
| 2026/27 | 2027/28 | |
|---|---|---|
| Tax on salary (£17,430 × 20%) | £3,486 | £3,486 |
| Tax on rental profit | £2,400 (20%) | £2,640 (22%) |
| Mortgage interest reduction (£5,000 × rate) | −£1,000 | −£1,100 |
| Total income tax | £4,886 | £5,026 |
The same landlord pays £140 more in 2027/28 because of the new property rate. A higher-rate taxpayer pays 42% on rental profit from April 2027 but still only gets a 22% reduction for mortgage interest.
Wales and Scotland
Wales uses the same rates as England for 2026/27. The Senedd can set its own property income rates from 2027/28 and hadn't done so by October 2026. Scotland's 2026/27 bands are 19%, 20%, 21%, 42%, 45% and 48%; Scottish rates for 2027/28 aren't set yet. We'll add both once they're published.
Making Tax Digital
If your qualifying income — gross rent plus self-employment turnover, before expenses — is over £50,000 you've been in Making Tax Digital since April 2026; over £30,000 you join in April 2027, and over £20,000 in April 2028. See Making Tax Digital for landlords.
Frequently asked questions
How much tax do I pay on rental income?
It depends on your other income. Rental profit is added on top of your salary or pension and taxed at your top rate: 20%, 40% or 45% in England for 2026/27, and 22%, 42% or 47% from 6 April 2027. Mortgage interest then gives a 20% or 22% reduction.
Can I deduct mortgage interest from rental income?
Not for individual landlords with residential property. Instead you get a basic-rate tax reduction — 20% in 2026/27 and 22% from 2027/28 — on the lower of your finance costs, rental profit and income above the personal allowance. Unused amounts carry forward.
What is the property allowance?
A £1,000 tax-free allowance for property income. You can deduct it instead of your actual expenses. It suits landlords with very low costs; if you use it you can't claim expenses or the mortgage interest reduction for that year.