Rental property tax calculator

Accurately calculate your Buy-to-Let tax liability and Section 24 mortgage relief in seconds. Updated for the 2025/2026 UK tax year, this tool helps sole trader landlords estimate their after-tax rental yield.

Landlord & Buy-to-Let Calculator (2025/26)

How to calculate your Rental Income Tax

Getting an accurate tax estimate is simple, but inputs must be precise due to Section 24 rules.

• Enter your Annual Salary: We need this to determine your tax band (Basic, Higher, or Additional). Your rental income sits on top of your job salary.
• Input Rental Income: The total gross rent you receive from tenants before any deductions.
• Deduct Allowable Expenses: Enter costs like agency fees, insurance, and repairs here. Do not include your mortgage payments in this box.
• Mortgage Interest (Crucial): Enter your mortgage interest payments in the dedicated “Section 24” field. Since the rules were fully phased in from April 2020, this is no longer a tax-deductible expense but gives you a 20% tax credit instead.

What taxes do landlords pay in the UK?

As a landlord, you don’t pay a separate “landlord tax”. Instead, your rental profits are subject to Income Tax based on your total earnings.

The “Stacking” Principle

HMRC doesn’t look at your income sources in isolation. Instead, they “stack” your rental income on top of your salary (or pension) to calculate your final tax bill. Your salary usually uses up your Personal Allowance and the lower tax bands first, leaving your rental income to be taxed at your highest marginal rate.

Here is how the calculation actually works:

Imagine your tax bands as buckets that fill up in order.

• The Scenario: You earn £40,000 from your job and £15,000 in profit from property. Your total income is £55,000.
• The Threshold: The Basic Rate (20%) band ends at £50,270.

Step-by-Step Breakdown:

• Salary (The Foundation): Your £40,000 salary uses up your tax-free Personal Allowance (£12,570) and fills up a large chunk of your Basic Rate band. You are currently a “Basic Rate Taxpayer”.
• The “Gap”: You still have £10,270 of space left in the Basic Rate band before you hit the £50,270 threshold (£50,270 – £40,000).
• Rental Income (The Top Layer): The first £10,270 of your rental profit fills that remaining gap. You pay 20% tax on this portion.
• The Tipping Point: The remaining £4,730 of your rental profit overflows into the Higher Rate band.
• The Result: You pay 40% tax on that final £4,730.

Why this matters: Even if your salary is relatively modest, your rental income can push you into the 40% tax bracket, significantly increasing your bill. This is why calculating your “blended” tax rate is critical.

Buy-to-Let Tax Rates (2025/26)

Your rental profit is taxed at standard UK Income Tax rates. The rate you pay depends on your total taxable income (salary + rental profit) for the year.

Section 24: The “Tenant Tax”

Unlike other businesses, landlords cannot deduct mortgage interest from their revenue to lower their taxable profit. Instead, you pay tax on the full rental profit and receive a 20% tax credit on your mortgage interest costs. This often pushes landlords into higher tax bands, which is why using a Section 24 tax calculator is essential for planning.

FAQ: Taxes of income from rental property

How much rent can I earn tax-free?

You have a Property Allowance of £1,000 per year. If your gross rental income is under £1,000, you don’t need to report it. If it’s higher, you must declare it. Note: You cannot claim both the £1,000 allowance and allowable expenses—you must choose the one that saves you more tax.

Can I deduct mortgage interest from rental income?

No. Under current Section 24 rules, mortgage interest is not a tax-deductible expense. Instead, you receive a basic rate relief (20% tax reducer) on your finance costs, regardless of whether you are a basic, higher or additional rate taxpayer. This is automatically handled in our buy to let tax calculator.

What expenses can I claim to reduce tax?

You can deduct “wholly and exclusively” business costs, including:

• Letting agent fees.
• Landlord insurance.
• Council tax and utility bills (if you pay them).
• Repairs and maintenance (e.g., fixing a boiler, but not installing a new luxury kitchen, which is a capital improvement).

Do I pay National Insurance on rental income?

Generally, no. Rental income is considered investment income, so Class 2/Class 4 NICs usually do not apply unless you are running a property business with extensive services (like a hotel or B&B) as your main job.