Do I pay tax on rental income?
Rental profit is normally taxable: start with rent and other property receipts, then deduct allowable day-to-day costs or use the property allowance where eligible. Reporting depends on gross income, profit and your wider circumstances; residential finance costs have special rules for individual landlords.
Last reviewed: 3 September 2026 · Editorial policy
Profit, not rent, is taxed
You are normally taxed on rental income after allowable expenses. Mortgage interest relief for residential property is restricted, so landlords should not assume cash profit and taxable profit are the same.
Capital gains are separate
Selling a rental property can create Capital Gains Tax reporting and payment deadlines. That is separate from annual rental income reporting.
When rental income needs reporting
The property allowance can cover up to £1,000 of qualifying gross property income, subject to exclusions. GOV.UK says to contact HMRC if annual rental income is more than £1,000 and up to £2,500, and to report through Self Assessment when it is more than £2,500 after allowable expenses or £10,000 before expenses.
Those thresholds describe common reporting routes, not whether the underlying profit is taxable in every case. Joint ownership, Rent a Room relief, overseas property, company ownership and income already dealt with by HMRC can change the process.
Expenses, repairs and improvements
Allowable revenue costs can include letting-agent fees, insurance, service charges, utilities paid by the landlord, professional fees and repairs. A repair restores an existing asset; an improvement creates or enhances an asset and is normally capital rather than an annual rental deduction.
Keep invoices that explain the work, not just card statements. If a project contains both repair and improvement work, ask the supplier for an itemised invoice so the tax treatment can be assessed rather than guessed.
Mortgage payments are not a single expense
Loan-capital repayments are not deducted from rental profit. Individual landlords with residential property generally receive a basic-rate tax reduction for qualifying finance costs rather than deducting all interest as an ordinary expense. Companies paying Corporation Tax follow different rules.
This can make taxable profit higher than cash left after the mortgage payment. Keep annual lender statements and separate capital, interest and fees.
Sale, losses and changes of use
A disposal can create a separate Capital Gains Tax calculation and, for UK residential property, a reporting and payment deadline may apply before the next Self Assessment return. Record acquisition costs, legal fees and capital improvements throughout ownership.
Property-business losses are generally carried forward against later profits of the same property business rather than set freely against salary. Moving into or out of the property, short-term letting and former furnished-holiday-let periods can require a more detailed review.