UK landlords pay Income Tax on rental profits (rental income minus allowable expenses), restricted from full mortgage interest relief since 2017 for individual landlords. On selling a rental property, Capital Gains Tax is due — 18% basic-rate band, 24% higher-rate band — within 60 days of completion.

This guide covers the main tax obligations for individual UK landlords. Limited-company landlords are treated differently — covered briefly at the end.

Income Tax on rental profits

Rental profit = rental income minus allowable expenses. Reported on Self Assessment.

Rental income includes

Rent received during the tax year (cash basis by default, accruals if elected and >£150,000 income).
Service charges and amenity payments received from tenants.
Premium payments on grant of lease (partly taxable as income, partly as capital).
Insurance proceeds for rental loss (lost rent during repairs).

Allowable expenses

Letting agent fees and management charges.
Maintenance and repairs (NOT improvements).
Insurance (landlord, building, contents).
Council tax and utility bills paid by the landlord.
Ground rent, service charges paid by the landlord (leasehold properties).
Accountancy fees.
Travel to / from the property (subject to wholly and exclusively rule).
Costs of finding tenants (advertising, referencing).
Cost of evicting bad tenants.
Replacement of domestic items (Replacement Domestic Items Relief — like-for-like only).

NOT allowable

Capital improvements (extensions, new bathrooms beyond like-for-like, structural changes) — these go into the CGT base cost.
Private use of the property.
Mortgage capital repayments (the principal — only interest portion is partly allowable, see below).
Travel between home and the property if there''s a regular pattern of repeated visits (HMRC argues this is commuting).

The mortgage interest restriction

Since 2017, individual landlords cannot fully deduct mortgage interest from rental income. Instead, a 20% basic-rate tax credit applies.

Mechanism:

Compute rental profit WITHOUT deducting mortgage interest.
Apply Income Tax at your marginal rate to that profit.
Reduce the tax by 20% of the interest paid.

Effect:

Basic-rate taxpayers (20% Income Tax): the restriction doesn''t hurt — 20% on profit minus 20% on interest = 20% on (profit minus interest), the same as before.
Higher-rate taxpayers (40%): the restriction adds 20% effective tax on the interest portion of rental income.
Additional-rate taxpayers (45%): adds 25% effective tax on the interest portion.

For a landlord with £20,000 rental income, £10,000 mortgage interest, and £5,000 other expenses (40% taxpayer):

Under old rules: profit = £20,000 - £10,000 - £5,000 = £5,000. Tax = £2,000.
Under current rules: profit = £20,000 - £5,000 = £15,000. Tax at 40% = £6,000. Minus 20% credit on £10,000 interest = £2,000. Net tax = £4,000.

Double the tax. This is why many higher-rate landlords have incorporated.

Capital Gains Tax on sale

When you sell a UK rental property:

Rate: 18% on gains within your basic-rate band, 24% above (from October 2024). 28% for residential property pre-October 2024.
Annual Exempt Amount: £3,000 per tax year (2024/25).
Reporting and payment: within 60 days of completion via a separate UK Property Disposal return.

The gain is computed as: sale proceeds minus base cost (purchase price + acquisition costs + capital improvements + selling costs).

For a property bought at £200,000 with £10,000 acquisition costs and £30,000 of improvements over the years, sold at £350,000 with £5,000 selling costs:

Gain = £350,000 - £200,000 - £10,000 - £30,000 - £5,000 = £105,000.
After Annual Exempt Amount: £102,000.
Tax (40% taxpayer, all above the basic-rate band): £24,480.

Tax due, return filed, payment made within 60 days.

Reliefs available

Private Residence Relief (PRR): applies if the property was your main residence at any point.
Letting Relief: applies in narrow cases where the property was your main home AND was let.
Rollover relief / Holdover relief / Gift Hold-Over Relief: in specific circumstances (gifts to family, business asset rollover).

These reliefs are complex and case-specific — get advice before relying on them.

SDLT on purchase

Stamp Duty Land Tax (SDLT) is payable on buying property. For additional properties (any property other than your single main residence):

A 3% surcharge applies on top of standard rates — raised to 5% from 31 October 2024.
So buying a buy-to-let at £250,000: standard SDLT (~£2,500 at the time of writing) PLUS 5% surcharge on the full purchase price = £15,000.
Companies buying residential property pay 15% on the whole purchase price above £500,000.

SDLT is paid by the buyer within 14 days of completion.

Limited-company vs individual landlords

Many higher-rate landlords now hold rental property in a limited company:

Mortgage interest fully deductible against Corporation Tax (no restriction).
Corporation Tax (19-25%) on profit, then dividend tax (8.75-39.35%) on extraction.
No PRR or letting relief available (these are individual reliefs).
Different SDLT treatment.
Extra administrative work (accounts, CT return, confirmation statement).

For a higher-rate landlord with mortgage debt, the company route can be tax-efficient. Setup is friction-heavy:

SDLT on transfer (full standard SDLT plus 5% surcharge — buying from "you" to "your company").
CGT on transfer at market value.
Lender consent often needed (many BTL mortgages can''t be transferred — refinancing required).

The break-even point for incorporation typically appears around 3-4 mortgaged properties for a higher-rate taxpayer. Below that, the friction isn''t worth it.

MTD for landlords from April 2026

If your gross rental income exceeds £50,000 (April 2026 onwards) or £30,000 (April 2027 onwards), Making Tax Digital for Income Tax applies. See our MTD for landlords guide.

What to do this year

Track every allowable expense — even small items add up.
If you''re a higher-rate taxpayer with mortgage debt, run the incorporation maths.
If you''re planning to sell, remember the 60-day rule — it''s an absolute deadline.
If you''re in scope of MTD ITSA, pick software and start digital record-keeping before April 2026.

UK landlord tax guide: income, CGT, and allowances