Landlord tax in 2026: what you owe and what you can claim

Rates and bands below are for England, Wales and Northern Ireland. Scottish taxpayers pay Scottish rates on rental profit — the structure is the same, the numbers are not.

What you pay on rental profit in 2026/27

Rental profit is added to your other income and taxed at whatever rate that pushes it into. There is no separate property tax rate this year — that starts next year.

Band	Taxable income	Rate on rental profit 2026/27	Rate from April 2027
Personal allowance	Up to £12,570	0%	0%
Basic	£12,571–£50,270	20%	22%
Higher	£50,271–£125,140	40%	42%
Additional	Over £125,140	45%	47%

There is a separate £1,000 property allowance. If your gross rental income for the year is under £1,000 you do not need to declare it at all. If it is over, you can either claim the £1,000 instead of your actual expenses, or claim the expenses — not both. For anyone with a mortgage the expenses are almost always worth more.

What changes in April 2027

At the Autumn Budget on 26 November 2025 the government announced that property income would get its own rates from April 2027, set two percentage points above the main income tax rates. Savings income moves the same way at the same time; dividends went up two points a year earlier, in April 2026.

What it costs a real landlord

Take a higher-rate taxpayer with £60,000 of employment income and one let property: £18,000 of rent, £3,000 of running costs and £6,000 of mortgage interest.

Step	2026/27	2027/28
Rent	£18,000	£18,000
Less running costs	−£3,000	−£3,000
Taxable property profit (interest is not deducted)	£15,000	£15,000
Tax at the higher rate	£6,000 (40%)	£6,300 (42%)
Less Section 24 credit at 20% of £6,000 interest	−£1,200	−£1,200
Tax on the property	£4,800	£5,100

Section 24, in one screen

Since April 2020 you cannot deduct mortgage interest from rental income. You add it back, pay tax on the higher profit, and then take a tax reducer worth 20% of the interest. For a basic-rate taxpayer that is roughly neutral. For a higher-rate taxpayer it is a real cost, and it is the single biggest reason landlords look at limited companies.

It also has a second effect that catches people out: because the profit figure is now bigger, it can push you into the higher-rate band, remove your child benefit, or start tapering your personal allowance, even though your actual cash position has not changed. The rule bites hardest on highly geared portfolios in the £40,000–£60,000 income range.

What you can and cannot claim

Claimable in full	Not claimable
Letting agent and management fees	Mortgage interest (20% credit instead)
Repairs and maintenance that restore the property	Improvements — these go against CGT when you sell
Landlord insurance	Your own time or labour
Ground rent, service charges, council tax and utilities you pay	Capital cost of the property itself
Accountancy fees for the rental accounts	Personal expenses with incidental business use
Gas, electrical and EPC certificates	Fines and penalties
Replacing domestic items like a cooker or a sofa, like for like	The first purchase of an item for an unfurnished let
Advertising and tenant referencing	Costs of buying or selling — these are CGT costs

The tax calendar

Date	What happens
5 April	Tax year ends
7 May, 7 Aug, 7 Nov, 7 Feb	MTD quarterly update deadlines, if you are in scope
5 October	Deadline to register for self assessment if this is your first year letting
31 October	Paper tax return deadline
31 January	Online return, balancing payment, and first payment on account
31 July	Second payment on account
Within 60 days of completion	Report and pay CGT on a UK residential property sale

Capital gains tax when you sell

Gains on residential property are taxed at 18% to the extent they fall within your remaining basic rate band, and 24% above it. The annual exempt amount for 2026/27 is £3,000. You deduct the purchase price, the buying and selling costs, and any capital improvements — which is why keeping the invoices for that new kitchen matters years later even though you could not claim it against rent at the time.

If you ever lived in the property, private residence relief may cover part of the gain. If you are selling with a tenant in place, the timing interacts with possession law as well as tax: our guide to Ground 1A covers what you can and cannot do to get vacant possession.

Limited company: when it actually pays

Incorporating solves Section 24 — companies deduct mortgage interest in full — and the April 2027 property income rates apply to individuals, not companies. That widens the gap again. It is not free, though:

• Moving existing properties into a company is a sale. Expect capital gains tax and stamp duty at the higher rates unless a relief applies.
• Limited company mortgage rates and fees are typically higher than personal ones.
• Profits are taxed in the company, then taxed again when you take them out. Dividend rates rose two points in April 2026.
• You add annual accounts, corporation tax returns and a confirmation statement to your admin.

The rough shape: a higher-rate taxpayer building a geared portfolio from here is often better off in a company. A basic-rate taxpayer with one or two low-debt properties usually is not. Anyone with existing properties needs the transfer cost modelled before anything else, because it frequently swallows a decade of savings.

Making Tax Digital

From 6 April 2026, landlords with qualifying income over £50,000 must keep digital records and send HMRC a quarterly update using compatible software. £30,000 follows in April 2027 and £20,000 in April 2028. Qualifying income is gross rent plus any self-employment turnover, measured before expenses — not profit. Full detail, including which software is recognised, is in our Making Tax Digital guide.

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