Guide

Landlords’ tax guide: Do landlords pay tax on rental income?

Letting out a property? Make sure you know which taxes you need to pay as a landlord.

A landlord standing next to their rental property.

There are lots of ways to be a landlord. You might rent out a property for some extra cash on the side, or manage a portfolio of rental homes as your main source of income. Whatever your landlord income looks like, you need to be clear on which taxes apply to your earnings.

If you’ve wondered ‘how is rental Income Taxed?’ or questioned what landlords need to pay tax on, this guide will tell you everything. We share the different taxes landlords need to pay, deadlines, and the process for reporting and paying.

What taxes do landlords need to pay?

There are several landlords' taxes you could be subject to:

1. Stamp Duty

You pay Stamp Duty when you purchase residential property. Rates vary depending on the property values – properties with a value up to £250,000 are free from Stamp Duty.You pay 5% on the value between £250,001 and £925,000, and 10% on the value between £925,001 and £1.5 million. Property value above £1.5 million is taxed at 12%. An additional 3% is applied on top of these rates if you own more than one residential property, so as a landlord, you’ll likely need to pay this extra percentage.

2. Income Tax

You pay Income Tax on rental income. You pay a rate of 20%, 40%, or 45% depending on your total taxable income (this includes other earnings from business or employment).

3. National Insurance

You may need to pay National Insurance on property income in certain circumstances when you file a Self Assessment Tax Return. Your rate will depend on your earnings and other sources of employment. You can check what National Insurance you need to pay on the HMRC website.

4. Capital Gains Tax

You pay Capital Gains Tax when you sell or dispose of a property.

The two main rates of Capital Gains Tax are 18% and 28%, and the amount you pay depends on your income. Calculations can get tricky here – check out our guide to understanding Capital Gains Tax for landlords for pointers.

You’ll be taxed differently depending on whether you own the properties personally or through a company. You pay Income Tax on properties you own personally – 20%, 40%, or 45%. When you own property through a limited company, it’s subject to Corporation Tax instead, with the main rate being 25% for the 2024/25 tax year.

The amount of Capital Gains Tax you pay can also differ, depending on whether you’ve lived in the property during ownership. You might be entitled to Private Residence Relief.

What counts as rental income?

Rental income includes the rent your tenants pay, along with other income such as:

  • Charges for utilities like heating and hot water, cleaning of communal areas, property repairs, and the use of furniture
  • Non-refundable deposits and money kept over from returnable deposits

Note: you can deduct allowable expenses before your rental income is taxed, so the amount you’re taxed on will probably be lower than your total rental income.

What are rental Income Tax rates for 2024?

Income Tax rates apply across business and rental income. For 2024/25, the rates are:

  • 20% for income between £12,570 - £50,270 (basic rate)
  • 40% for income between £50,271 - £125,140 (higher rate)
  • 45% for income above £125,140 (additional rate)

Here’s what landlord tax could look like in practice:

Pedro earns £25,000 a year from his job, and an additional £30,000 from the two properties he lets out.

The income from his job is taxed at the basic rate (20%), but his combined income from employment and property (£55,000) takes him past the higher rate threshold (40%).

So, once his personal allowance is taken into consideration (£12,570), Pedro will pay 20% Income Tax on his earnings between £12,570 - £50,270, and 40% on his earnings above £50,270.

Rental Income Tax deadline

The deadline for filing and paying your rental Income Tax is 31 January. Other deadlines you should keep in mind for UK landlord tax submissions are:

  • 5 October – for registering for Self Assessment
  • 31 October – the deadline for paper submissions
  • 30 December – for letting HMRC know to collect Self Assessment payments through PAYE
  • 31 July – the deadline for paying your second Income Tax payment (if you make payments on account)

If you don’t submit your Self Assessment and pay your bill by 31 January, you could be subject to a penalty. The later your submission following the deadline, the more interest you’ll pay. It’s best to get your Income Tax Return sorted early – so you can plan for your bill and avoid any penalties.

Buy-to-let allowable expenses and tax relief

If you’ve been wondering ‘how much tax do landlords pay?’, it depends on the expenses you pay (along with any other income you earn).

Claiming allowable expenses lowers your taxable profit, so you pay Income Tax on profits and not your total rental income. You can claim allowable expenses for things like:

  1. Professional fees – accountants, solicitors, and estate agents
  2. Maintenance costs like replacing a boiler or fixing a door
  3. Utility bills
  4. Rent, ground rent, and service charges
  5. Council Tax
  6. Services like cleaning or gardening
  7. Buildings and contents insurance
  8. Other direct costs – stationery, marketing, or advertising costs

The rules differ slightly depending on the property type – residential, commercial, or furnished holiday lettings. You can learn about the expenses you can claim on the HMRC website. You can deduct these expenses from your rental income to get your total taxable amount. It’s this you’ll pay tax on – not the total rental earnings.

Since 6 April 2020, residential landlords have been able to claim basic rate tax relief on finance costs, such as mortgage interest. Learn more about what this tax relief means for you on the HMRC website.

What happens when you have multiple rental properties?

If you’re letting more than one property, you can combine the rental income and expenses of all properties (excluding holiday lettings) for landlord tax purposes. So, if you rent five residential properties you can add all the rental income together and deduct all expenses to calculate the total taxable amount.

You can also deduct losses against profits from other properties. You need to calculate the total taxable amount for furnished holiday lettings separately to claim reliefs for this property type.

How to pay rental Income Tax

You pay tax on rental income through the Self Assessment system. This involves a single annual return, due by 31 January (along with payment) until Making Tax Digital for Income Tax (MTD for ITSA) starts.

Once you’ve registered for Self Assessment, you’ll receive a Unique Taxpayer Reference (UTR) number. Use this to set up an online tax account, and HMRC will notify you when it’s time to submit a Self Assessment Tax Return.

On the Tax Return form, you’ll need to include a few basic business details, along with information about your expenses and income. Accurate record-keeping is key – so it helps to have cloud-based software in place to track what you spend and earn. We cover the whole submission process in our guide to Self Assessment for landlords.

From April 2026, some landlords will need to follow MTD for ITSA rules. You can get ahead of the legislation now, by using cloud-based software to manage your rental Income Tax. Check out our guide on how to fill in a Self Assessment Tax Return online if it’s your first time.

Paying Capital Gains Taxes when you sell a rental property

You won’t need to pay Capital Gains Tax until you sell the property. There are two main rates: 18% and 28%. The rate you pay depends on your Income Tax bracket and other factors – check out our full guide to Capital Gains Tax for the specifics.

Capital Gains Tax needs to be reported and paid within 60 days of a residential property sale. You’ll need a Capital Gains Tax on UK property account to report and pay this tax, which can be set up through your Government Gateway profile. If you’re registered for Self Assessment, you’ll also need to include details of the sale in your Income Tax Return.

Note: you may be entitled to some Private Residence Relief if the property you’re selling has been your home at any point. Check out HMRC’s guidance to see if you meet the criteria.

How landlords can ensure they’re tax-compliant

You need to keep accurate and up-to-date records to be tax-compliant as a landlord. Xero can help you do just that, with cloud-based accounting software that automates data entry and helps you maintain a clear view of your finances.

Make note of the relevant tax deadlines, and keep tabs on new legislation. We’re regularly updating our landlord’s MTD content to make sure you have the tools and resources to stay compliant.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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