UK Landlord Tax Guide (2026/27)

1. Overview: landlord tax in 2026/27

The UK residential landlord tax landscape has tightened progressively since the 2015 Summer Budget announcement of what would become Section 24. The change was phased in over four tax years and reached full bite in April 2020. From that point onwards, mortgage interest and other finance costs are no longer deductible from rental income for individual landlords. The Treasury replaced the deduction with a basic-rate tax reducer of 20% of the finance cost, restricted to the lower of finance costs, property profits, and adjusted total income. The mechanical effect is severe for higher-rate landlords: gross rents inflate taxable income (potentially pushing the landlord into a higher tax band or eroding the personal allowance) while the offsetting credit is fixed at the basic rate. The full worked example in section 3 shows how this turns what looked like a modest pre-tax profit into a meaningful effective tax hike.

The Furnished Holiday Lettings regime was the last residual tax-advantaged route for property holders. From 6 April 2025 that regime was abolished. Existing FHL operators are now treated as ordinary property businesses: no more capital allowances on furniture and equipment, no more BADR on eventual disposal, no more relevant earnings status for pension contribution caps, and Section 24 applies to FHL mortgage interest just as it does to any residential let. Separately, MTD for Income Tax Self Assessment phases in from April 2026 (landlords with combined property and self-employment income above £50,000) and April 2027 (above £30,000), bringing quarterly digital updates and an end-of-period statement workflow that replaces the familiar annual SA100. None of these changes reduce tax. They expand the compliance perimeter and compress the timing.

2. Rental income basics and assessment

A UK residential landlord operates a "property business" for Income Tax purposes. Rental income is assessed on the cash basis by default for landlords with gross receipts up to £150,000 per year, or on the accruals basis if the landlord elects (or is required by the size of the business). Most small private landlords use the cash basis: rent counts as income in the tax year actually received, expenses count in the tax year actually paid. The accruals basis recognises income and expense in the period they are earned or incurred regardless of cash timing, and is mandatory above the £150,000 threshold or for unincorporated property partnerships.

The assessment runs by tax year, 6 April to the following 5 April. Net property profit (income minus allowable expenses, before applying the Section 24 finance cost credit) is reported on the SA105 supplementary page of the Self Assessment SA100 return. From April 2026 the SA105 route is replaced for in-scope landlords by MTD ITSA: four quarterly digital updates, an end-of-period statement, and a final declaration that combines property, employment and any other income sources for the year. Penalties for late quarterly filing under MTD ITSA accrue via a points-based system - one point per missed quarterly deadline, with a £200 fine triggered on reaching a threshold of four points.

Property allowance. A flat £1,000 property allowance exempts the first £1,000 of gross property receipts per individual per tax year. Two practical uses: first, gross receipts at or below £1,000 need not be reported at all (no tax return needed for the property income alone). Second, if gross receipts exceed £1,000 the landlord can elect to claim partial relief, deducting £1,000 from gross receipts instead of actual expenses. The election is only worthwhile when actual deductible expenses are below £1,000 - rare for any normal let but common for occasional Airbnb-style short lets with minimal recurring cost.

When does NIC apply? Rental income from simple letting (the landlord owns the property and lets it out, perhaps via an agent) is investment income and not subject to Class 2 or Class 4 National Insurance. Where the activity rises to a trade - serviced accommodation with hotel-style services, multi-property portfolio run with substantial personal effort, or property dealing rather than holding - HMRC can recharacterise the activity as a trade, bringing in Class 4 NIC and full self-employed calculator mechanics. The dividing line is fact-sensitive and not always intuitive: passive letting of even ten properties usually remains investment, while running two heavily serviced Airbnbs can be a trade.

3. Section 24 mortgage interest credit

Section 24 of the Finance (No. 2) Act 2015 (inserting sections 272A and 274A into ITTOIA 2005) progressively removed the deduction for finance costs from residential property income. The change applied to mortgage interest, interest on loans to fund deposits, and the finance-cost element of any related fees. It does not affect commercial property, fully furnished holiday lets (until April 2025 - see section 6) or property held via a limited company structure. The replacement is a tax reducer of 20% of allowable finance costs, capped at the lowest of three measures: total finance costs, profits of the property business, and adjusted total income (taxable income minus losses, blind person's allowance and Gift Aid grossed-up element).

The mechanical hit. Three distinct consequences combine. First, taxable rental profit is higher because interest is no longer deducted from rent. Second, that higher figure can push the landlord into a higher tax band (£50,270 basic-rate ceiling for 2026/27, England / Wales / NI) or trigger the £100,000 personal allowance taper. Third, child benefit becomes subject to the High Income Child Benefit Charge once adjusted net income crosses £60,000. The 20% credit only partly offsets the tax on the extra band income, never the band tipping itself or the allowance erosion.

Worked example. Higher-rate landlord with other income solidly inside the 40% band (e.g. £55,000 salaried). One BTL property generating £20,000 of gross rent. Mortgage interest of £8,000 on the BTL loan. Other allowable expenses (agent fees, insurance, repairs, ground rent) of £2,500.

Under the post-2020 regime:

• Gross rent: £20,000
• Less other allowable expenses: £2,500
• Taxable property profit: £17,500
• Income Tax at 40% on £17,500: £7,000.00
• Less Section 24 basic-rate credit (20% × £8,000): £1,600.00
• Net Income Tax on the BTL: £5,400.00

Under the pre-2017 regime (illustrative comparison):

• Gross rent: £20,000
• Less mortgage interest: £8,000
• Less other allowable expenses: £2,500
• Taxable property profit: £9,500
• Income Tax at 40%: £3,800.00

Section 24 cost: £5,400.00 - £3,800.00 = £1,600.00 extra tax per year on identical economic activity. On the underlying real-cash profit (£20,000 rent minus £8,000 interest minus £2,500 other costs = £9,500), the effective tax rate has moved from 40% (pre-2017) to 57% (post-2020). On a portfolio with higher gearing the divergence widens further: a landlord where mortgage interest equals or exceeds true profit can face an effective rate north of 100%.

Restrictions on the credit. If the credit cannot be fully used in the current year because adjusted total income is too low, the unused portion carries forward to be set against future property finance costs. It cannot be set against any other income source - so a landlord whose adjusted total income is reduced to nil by other reliefs gets no immediate cash benefit from the credit that year.

Behavioural response. Many portfolio landlords have responded by incorporating: a UK limited company holding the rental properties is outside Section 24 and deducts mortgage interest as a normal business expense against Corporation Tax. The trade-off is the SDLT and CGT cost of transferring an existing portfolio into a new company (Section 162 incorporation relief can defer CGT in limited circumstances - typically for a property partnership with active management - but rarely covers a personally-held buy-to-let portfolio). The corporate route is therefore mainly a strategy for new acquisitions rather than retrospective conversion. The Corporation Tax calculator can model the post-CT cash extraction profile of a property company. Full HMRC guidance on Section 24 is at gov.uk changes to tax relief for residential landlords.

4. Allowable expenses and Replacement of Domestic Items relief

A residential landlord can deduct any expense that is wholly and exclusively incurred for the purposes of the property business. The wording is the same as for any Schedule D-style trading deduction, and the tests are familiar: business purpose, not capital, and not specifically disallowed.

Common allowable expenses. Letting agent fees (commission, finder's fee, tenancy renewal fee), accountant fees for preparation of the property pages of Self Assessment, ground rent and service charges on leasehold property, buildings insurance, contents insurance (where the landlord provides furniture and contents), landlord rent guarantee insurance, public liability insurance, advertising for tenants, professional fees for tenant referencing and inventory, gas safety certificates and other regulatory checks, repairs to the structure of the property (roof, walls, plumbing, electrics restored to working condition), redecoration between tenancies, gardening for shared external areas, cleaning between tenancies, utilities paid by the landlord (most common in HMOs), council tax during genuinely void periods, mortgage broker arrangement fees (the broker fee element, not the loan itself), and travel to and from the property for genuine business purposes.

Repairs versus improvements. The single most common HMRC enquiry point on a rental return. A repair restores the property to its prior condition using broadly equivalent modern materials and is deductible against income in the year incurred. An improvement increases the value or extends the capability of the asset and is capital - not deductible against rent, but added to the acquisition cost for CGT on eventual sale. The trickiest cases sit on the boundary: replacing a single-glazed window with a like-for-like modern equivalent is a repair (a 1960s timber single-glazed window cannot be sourced new today, so a modern UPVC double-glazed equivalent is allowed); converting the garage into a bedroom is an improvement. Renovating a worn kitchen with a comparable replacement is a repair; upgrading from budget to high-spec is improvement to the extent of the upgrade element. HMRC accepts incidental modernisation within an otherwise like-for-like repair (modern wiring on a rewire, B-rated boiler replacing C-rated) without converting the whole project into capital spend.

Replacement of Domestic Items relief (RDIR). From 6 April 2016 the old "wear and tear" allowance (10% of net rent for fully furnished lets) was replaced by RDIR. The relief is a deduction equal to the actual cost of replacing an existing item of furniture, furnishings, white goods or domestic appliances supplied for tenant use, less any disposal proceeds from the item replaced and less any element of the replacement cost attributable to improvement over a like-for-like replacement. The relief applies to all let residential property, including partly-furnished and unfurnished lets (where the landlord provides any item at all), not just fully furnished. It does not extend to the initial purchase of furniture for a newly-let property - only to subsequent replacements. Source: HMRC guidance at gov.uk income tax when you let property.

Disallowed costs. Capital expenditure on the structure, costs of acquiring the property (legal fees on purchase, SDLT on purchase, surveyor's fees on purchase), the landlord's own labour (no deduction for time, only for amounts actually paid out), private-use element of any partly-private cost, and finance costs (interest, broker fees on the loan itself) - these last flow through the Section 24 basic-rate credit mechanism instead.

5. Rent-a-Room scheme

The Rent-a-Room scheme exempts gross rental receipts of up to £7,500 per tax year (£3,750 each if the property is jointly owned) from letting out a furnished room or rooms in the landlord's only or main residence. The scheme is automatic if gross receipts are within the cap - no tax return needed for the rental income. If receipts exceed the cap, the landlord chooses each tax year between two methods:

• Scheme method: tax the excess over £7,500 only, with no other expense deduction.
• Standard method: tax the full receipts less actual allowable expenses (as for any rental property).

The election is made annually on the SA105 supplementary page. The scheme method wins where actual expenses are modest relative to the £7,500 cap; the standard method wins where expenses (a substantial proportion of utilities, cleaning, maintenance allocated to the let-room) approach or exceed the cap. There is no expense deduction within the scheme - the £7,500 is a single flat allowance, not a top-up to ordinary deductions.

Eligibility limits. The room must be furnished and in the landlord's only or main residence at the time of letting (so a temporarily vacated main home between two genuine occupations does not qualify, and a separate flat let out within a converted house with no shared space does not qualify). The scheme covers lodgers taking a room as part of the household, not separate self-contained units. It applies equally to owner-occupiers and to tenants who sublet (with the landlord's written consent) a room in their own rented home. Short-stay bookings via platforms like Airbnb count, provided the property is genuinely the host's main residence and the let is of a room (not the whole property) and is furnished. The scheme is one of the few remaining tax-advantaged structures in UK property and is widely under-claimed by casual hosts who default to ordinary tax assessment without realising the £7,500 flat exemption is available. HMRC guidance is at gov.uk rent room in your home.

6. FHL abolition from 6 April 2025

The Furnished Holiday Lettings regime was a long-standing preferential tax bucket for short-let, fully-furnished properties meeting strict availability and occupancy tests (210 days available, 105 days actually let, with no single let exceeding 31 days as the dominant pattern). Properties that qualified for FHL status enjoyed four tax advantages compared with ordinary residential lets: full mortgage interest relief outside the Section 24 restriction, plant and machinery capital allowances on furniture and equipment, profits counted as relevant earnings for pension contribution caps, and the eventual sale qualified for Business Asset Disposal Relief at the 10% (now 14% from 6 April 2025) CGT rate rather than the standard residential 18/24%.

What changed. The Spring Budget 2024 announced abolition of the FHL regime, legislated in Finance (No. 2) Act 2024 and effective from 6 April 2025 for Income Tax and Corporation Tax purposes (1 April 2025 for companies). From those effective dates, FHL profits are taxed as ordinary property business profits:

• Mortgage interest moves inside Section 24 and the 20% basic-rate credit. Full interest deduction ceases.
• Capital allowances on furniture and equipment are no longer available. Future replacements fall under Replacement of Domestic Items relief instead. Existing pools of unrelieved expenditure can continue to be claimed via writing-down allowances against general property business profits.
• Profits no longer count as "relevant earnings" for the £60,000 annual pension contribution allowance. A landlord relying on FHL profits to make large personal pension contributions loses that route.
• Disposals on or after 6 April 2025 are taxed at standard residential CGT rates (18% / 24%) without BADR. Disposals before that date qualifying for BADR remain at the lower rate even where contracts were exchanged before but completion fell after the cut-off, subject to specific anti-forestalling rules.

Transitional rules. Three deserve specific attention. First, FHL losses carried forward at 5 April 2025 can be offset against future general property business profits (not just future FHL-origin profits) - a small relief. Second, capital allowances pools continue to be written down at standard rates against general property business profits; the existing tax-relieved expenditure is not clawed back. Third, anti-forestalling provisions block attempts to lock in BADR by unconditional contract before 6 April 2025 with deferred completion - HMRC will treat the disposal as if it occurred on completion for BADR purposes unless specific commercial criteria are met.

Practical impact. A leveraged short-let cottage in Cornwall or the Lake District typically loses 4-8 percentage points of after-tax yield under the new regime, depending on debt level and the owner's marginal tax band. Some operators have restructured into limited company form to preserve interest deduction; others have switched to long assured shorthold tenancies; some have sold. The Treasury costing assumed roughly £245m of revenue per year from the change once steady-state. Source: gov.uk abolition of the FHL tax regime.

7. SDLT 5% additional dwelling surcharge

Stamp Duty Land Tax in England and Northern Ireland (and its devolved equivalents - Land Transaction Tax in Wales, Land and Buildings Transaction Tax in Scotland) applies a surcharge on the purchase of second homes and buy-to-let properties. The English/NI surcharge was originally 3% from April 2016, raised to 5% in the Autumn 2024 Budget for transactions on or after 31 October 2024 (Welsh LTT and Scottish LBTT have their own surcharge rates - consult devolved guidance for those).

How the surcharge applies. The 5% adds to every band of the standard SDLT scale. A £300,000 BTL with no first-time-buyer relief attracts standard SDLT of £2,500 (£0 on the first £125,000, £2,500 at 2% on the next £125,000, £0 at 5% on the remaining £50,000 from the £250,000 boundary) plus the 5% surcharge of £15,000 on the full purchase price = £17,500 total. The same property bought as a main residence with no other property worldwide attracts £2,500. The surcharge applies on every additional dwelling, not just the second - so a portfolio landlord adding a tenth property pays the same 5% as a homeowner buying their first BTL.

The "additional dwelling" test. The surcharge applies if, at the end of the day of completion, the buyer (or any joint buyer) owns any interest in any other residential property anywhere in the world worth £40,000 or more, AND the property being bought is not replacing the buyer's main residence within a 36-month window (a 36-month look-back from completion for sale of the previous main residence, OR a 36-month forward window to sell it after the new purchase, in which case the surcharge is paid up-front and refunded on subsequent sale). The test catches non-obvious cases: an inherited fractional interest in a parental property, a foreign property held in personal name, a property held by a spouse (the surcharge is calculated on the household for married couples and civil partners). Use the stamp duty calculator to model the bill including the surcharge for any additional-dwelling purchase scenario.

Authoritative guidance is at gov.uk SDLT buying an additional residential property.

8. Non-resident landlord scheme

Where a UK property is owned by a landlord whose usual place of abode is outside the UK for more than six months in the tax year, the Non-Resident Landlord Scheme (NRLS) requires the letting agent (or the tenant directly, if no agent) to withhold basic-rate Income Tax at 20% from rental payments before remitting them to the landlord. The scheme exists because non-UK-resident landlords are outside the direct reach of HMRC's normal enforcement tools, and the Treasury wants tax paid on UK-source rental income at source rather than relying on voluntary compliance from abroad.

How the withholding works. The letting agent calculates 20% of the net rental income for the quarter (gross rent received less allowable expenses reasonably attributable to the property and known to the agent - typically agency fees, repairs paid by the agent, and management charges, but not mortgage interest as that is not known to the agent). The withheld sum is paid to HMRC quarterly via form NRLQ. The agent issues form NRL6 to the landlord summarising the gross rent, allowable expenses, withheld tax and net remitted amount.

Approval to receive rent gross. A non-resident landlord can apply to HMRC for approval to receive rental income gross (without the 20% withholding) by submitting form NRL1 (individuals), NRL2 (companies) or NRL3 (trusts). HMRC grants approval where it is satisfied the landlord's UK tax affairs are up to date and the landlord will file a UK Self Assessment return reporting the rental income. Approval is prospective: agents must continue withholding from the date of the rental income up to the date the HMRC approval letter is issued. Approval is property-by-property and agent-by-agent: an approval issued to a landlord for one property managed by Agent A does not extend to a second property managed by Agent B without a separate application.

Even with approval, the landlord remains subject to UK Self Assessment on the rental profit, with Section 24, RDIR and all the other rules in this guide applying identically to a UK resident. The NRLS is a withholding mechanism, not a separate tax regime. Source: gov.uk non-resident landlords tax on rental income.

9. Joint ownership and Form 17

Where two or more people jointly own a let property, the default tax position depends on the relationship between the owners and the legal title arrangement.

Married couples and civil partners. The default tax split is 50/50 of rental income regardless of the actual beneficial ownership shares. This rule applies under section 836 of ITA 2007 and overrides the beneficial ownership position unless the couple files HMRC form 17 to elect for a tax split matching the actual ownership. Form 17 is a "declaration of beneficial interests in joint property and income", supported by evidence of the actual ownership (a deed of trust signed and witnessed showing the precise percentage shares). The form must be filed with HMRC within 60 days of being signed by both spouses, and takes effect from the date of signature. An election can only specify the actual beneficial ownership split - you cannot elect for an arbitrary 90/10 if the beneficial ownership is in fact 60/40.

Why couples bother. Where one spouse is a higher-rate or additional-rate taxpayer and the other is a basic-rate or non-taxpayer (perhaps unemployed, retired or working part-time), shifting rental income to the lower-band spouse reduces the household tax bill. A structured deed of trust granting (say) 90% beneficial ownership to the lower-band spouse, combined with a form 17 election, can move most of the rental profit into the basic-rate band. The deed needs to be a genuine transfer of beneficial ownership, not a paper exercise - the lower-band spouse must have the legal entitlement to 90% of any eventual sale proceeds and 90% of any rental income, with no side agreement reversing the position.

Unmarried co-owners. No 50/50 default. Tax follows the actual beneficial ownership without any need for a form 17 election. A property owned 70/30 by two friends generates 70/30 of the rental income for tax purposes automatically.

Tenants in common versus joint tenants. Joint tenants own the whole property jointly (no identifiable individual shares), so for Income Tax purposes joint tenants share rental income equally. To hold unequal beneficial shares the legal title must be "tenants in common" - a different conveyancing structure that records explicit percentage shares. Couples wanting to use form 17 typically first sever the joint tenancy and become tenants in common, then sign the deed of trust, then file form 17.

10. Capital Gains Tax on disposal

On sale of a let residential property, CGT applies to the gain (sale proceeds minus acquisition cost minus enhancement expenditure minus selling and acquisition costs). Two structural points first: an annual exempt amount of £3,000 applies for 2026/27 (down from £6,000 in 2023/24, £12,300 in 2022/23 and £12,300 in 2021/22), and the gain is calculated for the tax year of completion (exchange date is irrelevant for CGT purposes - the disposal is the unconditional contract date or the date of completion, whichever is earlier; in practice this is normally the completion date).

Rates from 30 October 2024. Residential property gains are taxed at 18% within the landlord's unused basic-rate band and 24% above it. The lower 10/20% rates that applied to non-residential and other assets do not apply to residential property. (The Autumn 2024 Budget brought non-residential CGT into alignment by raising it from 10/20% to 18/24%, eliminating the distinction.)

Principal Private Residence relief. A property that has been the landlord's main residence at any point during ownership qualifies for PRR for the period(s) of actual occupation as main residence plus the final nine months of ownership (whether or not lived in during those nine months). The gain is then time-apportioned: the PRR-eligible months / total months of ownership × total gain = exempt portion. For a property bought as main residence in (say) 2010, lived in until 2015, then let out until sale in 2025 (15 years total ownership, 5 years main residence + 0.75 years final period = 5.75 PRR-eligible years out of 15), about 38% of the gain is exempt under PRR.

Letting Relief - now narrow. Before April 2020, Letting Relief gave up to £40,000 additional exemption (matched to the PRR amount) on a property that had been the main residence and then let out. From 6 April 2020, Letting Relief is available only where the landlord shared occupancy of the property with the tenant for the part of the ownership period being claimed for - i.e. a lodger arrangement in the landlord's main residence, not a pure BTL conversion of a former main home. Most former-main-home buy-to-lets get no Letting Relief at all in 2026/27.

60-day reporting. Residential property disposals with a CGT liability must be reported and paid within 60 days of completion via HMRC's UK Property Disposal service (online portal at gov.uk). This is a separate filing from the annual Self Assessment return, although the same gain is also entered on the SA108 capital gains pages for reconciliation. Late filing attracts an immediate £100 penalty plus daily £10 penalties after three months (capped at £900) plus 5% of unpaid tax after six months and again after twelve months. The reporting requirement applies even if all the gain is sheltered by PRR (no tax to pay) - though if no CGT is due, the report is not strictly required, only the annual SA108 entry. Estimate the bill quickly with the capital gains tax calculator before completion to make sure the 60-day cashflow is planned for. Source: gov.uk report and pay CGT on UK residential property.

11. Making Tax Digital for Income Tax

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the phased replacement of the annual SA100 paper / online return with a quarterly digital submission model. The mandate has been delayed multiple times since first announced in 2015; the current legislated timeline is April 2026 for the first tranche.

The phasing. From 6 April 2026, individual landlords (and self-employed individuals) with combined gross property and self-employment income above £50,000 per year are required to use MTD ITSA. From 6 April 2027, the threshold drops to £30,000. A further phase covering the £20,000-£30,000 band is signalled but not yet legislated. Property partnerships and limited companies are outside the personal MTD ITSA scope; companies file via Corporation Tax MTD when that is mandated separately.

What MTD ITSA requires. Four obligations replace the single annual SA100:

• Maintain digital records of all property income and expenditure (no paper-only bookkeeping).
• File quarterly digital updates of property income and expenditure to HMRC, due 7 August, 7 November, 7 February and 7 May for the four standard quarters ending 5 July, 5 October, 5 January and 5 April.
• File an end-of-period statement after the tax year end, including any year-end accounting adjustments and elections (Replacement of Domestic Items relief, property allowance election, Rent-a-Room election).
• File a final declaration combining property income, employment income, pension income and any other sources into the equivalent of the current SA100 - replacing the annual return for in-scope taxpayers.

Software. Quarterly updates must be filed via MTD-compatible software. HMRC publishes a list of approved vendors at gov.uk; the landlord-focused options currently include Hammock, Landlord Studio, FreeAgent, Xero, QuickBooks and several spreadsheet bridging tools. The Self Assessment online portal that landlords have used for the SA100 since 2008 does not accept MTD quarterly submissions.

Penalties. MTD ITSA introduces a points-based late filing penalty system. One point per missed quarterly update; a £200 fixed penalty triggered on reaching four points; points expire after a clean compliance period (length depends on submission frequency). Late payment penalties move to a graduated daily rate, with no penalty if paid within 15 days, 2% if paid within 30 days, 4% if outstanding after 30 days, and continuing daily charges thereafter. The points system replaces the flat £100 late filing penalty that has applied to the SA100 since 2011. Source: gov.uk Making Tax Digital for Income Tax.

12. Frequently asked questions

How does Section 24 mortgage interest relief work for UK landlords?

Since 6 April 2020 mortgage interest and other finance costs on residential lettings are no longer deductible against rental income. Instead, the landlord receives a basic-rate tax credit of 20% of the finance cost, capped at the lower of: total finance costs, profits of the property business, and adjusted total income. Higher-rate and additional-rate landlords are the worst affected because the credit value is fixed at basic rate while taxable profit is inflated. The change was introduced by Finance Act 2017 and phased in over four years from 2017/18 to 2020/21.

Is rental income from one room in my home tax-free?

Yes if you opt into the Rent-a-Room scheme and the gross rental receipts do not exceed £7,500 per tax year (£3,750 each if the property is jointly owned). The room must be furnished and in your main residence. You cannot also claim expenses while in the scheme - it is a flat allowance, opted in via your Self Assessment return. If receipts exceed the cap you choose between paying tax on the excess only (scheme method) or paying tax on profit using normal expense deduction (standard method). HMRC guidance is at gov.uk/rent-room-in-your-home.

What changed for Furnished Holiday Lets from 6 April 2025?

The Furnished Holiday Letting tax regime was abolished from 6 April 2025. FHL properties are now taxed in line with other property income. The four headline consequences: full mortgage interest relief is replaced by the Section 24 basic-rate credit, capital allowances are no longer available on furniture and equipment (replaced by the Replacement of Domestic Items relief), profits no longer count as relevant earnings for pension contribution purposes, and Business Asset Disposal Relief is no longer available on the eventual sale (so CGT is at the standard residential 18/24% rather than 10%). Transitional rules permit any FHL loss carried forward at 5 April 2025 to be set against future general property business profits.

When do landlords need to start using MTD for Income Tax?

Landlords with combined gross income from self-employment and property above £50,000 per year must use MTD for Income Tax Self Assessment from 6 April 2026. The threshold drops to £30,000 from 6 April 2027. MTD ITSA requires quarterly digital updates to HMRC using approved software, an end-of-period statement and a final declaration replacing the SA100 return. Properties owned via a partnership or limited company are outside the personal MTD ITSA scope - companies file via Corporation Tax MTD when phased in, and property partnerships have a deferred MTD start date.

How much is Stamp Duty on a buy-to-let property in 2026/27?

Second-home and buy-to-let purchases attract the standard SDLT band rates plus a 5% additional dwelling surcharge on the entire purchase price. The surcharge was raised from 3% to 5% in the Autumn 2024 Budget for transactions on or after 31 October 2024. A £300,000 BTL therefore attracts £15,000 surcharge plus the normal banded SDLT on top. The surcharge also applies where any joint buyer already owns a residential property worldwide, even if the other buyer does not. The full SDLT bill including surcharge can be modelled on the stamp duty calculator.

What expenses can landlords claim against rental income?

Allowable deductions include: repairs and maintenance that restore the property to its original condition (not improvements), letting agent fees, accountant fees, ground rent and service charges, buildings and contents insurance, utility bills paid by the landlord, council tax during void periods, advertising for tenants, and a 100% deduction under Replacement of Domestic Items relief for like-for-like replacement of furniture, white goods and soft furnishings. Capital expenditure on the property structure - extensions, new kitchens, double glazing where there was none - is not deductible against income but adds to the base cost for CGT on eventual sale.

What is the difference between a repair and an improvement?

A repair restores the property to its prior condition using broadly equivalent modern materials. Replacing a worn-out single-glazed window with a like-for-like modern equivalent is a repair (deductible). Upgrading from single to double glazing throughout where there was none is an improvement (capital, not deductible against income but added to acquisition cost for CGT). Replacing a worn kitchen with a broadly similar one is a repair; installing a high-spec kitchen where the previous one was budget standard is an improvement to the extent of the upgrade element. HMRC accepts that minor incidental upgrades within a repair (modern wiring, new boiler ratings) do not convert the whole job into capital.

How much CGT do I pay when I sell a buy-to-let property?

For disposals on or after 30 October 2024, residential property gains are taxed at 18% within your unused basic-rate band and 24% above it. The annual exempt amount is £3,000 for 2026/27 (down from £6,000 in 2023/24 and £12,300 in 2022/23). You must report the gain and pay the tax within 60 days of completion via HMRC's UK Property Disposal service. The same gain is also entered on your annual Self Assessment return for reconciliation. Failure to file the 60-day report attracts an immediate £100 penalty plus daily penalties after three months.

How does the non-resident landlord scheme work?

If a landlord's usual place of abode is outside the UK for more than six months, the letting agent (or tenant if no agent) must withhold basic-rate tax at 20% from rent before remitting it to the landlord. The landlord can apply to HMRC for approval to receive rent gross by submitting form NRL1 (individuals), NRL2 (companies) or NRL3 (trusts). Approval is granted where HMRC is satisfied the landlord's UK tax affairs are up to date. The landlord still files a UK Self Assessment return declaring the rental income and reclaiming any over-withheld tax. Approval applies prospectively from the date HMRC issues the notice; agents must withhold until then.

Can married couples split rental income unequally?

For property held jointly by a married couple or civil partners, the default tax treatment is a 50/50 income split regardless of the actual beneficial ownership shares. To be taxed in proportion to the actual beneficial ownership, both spouses must sign and file HMRC form 17 along with evidence of the actual ownership split (a deed of trust is the cleanest evidence). The form must be filed within 60 days of signing. Form 17 only works for spouses or civil partners and only for property they jointly own beneficially. Unmarried co-owners are always taxed in proportion to beneficial ownership without needing form 17.

Does Principal Private Residence relief apply to a let-out property?

Only to the period during which the property was your main home. PRR fully exempts the gain attributable to periods of actual occupation as main residence plus the final nine months of ownership (whether or not lived in). Any period of letting that was not also concurrent residence is not exempt. Letting Relief (formerly worth up to £40,000) was restricted from 6 April 2020 to cases where the landlord shared occupancy with the tenant - it is not available for a pure buy-to-let conversion of a former main home. The net effect: a former main home converted to BTL has a partly-PRR partly-taxable gain calculated by simple time apportionment.

Can I deduct mortgage interest if my BTL is held through a limited company?

Yes. Section 24 only restricts finance cost relief for individuals (and partnerships of individuals). A UK limited company holding residential property as an investment deducts mortgage interest as a normal business expense against rental profits subject to Corporation Tax. This is the single biggest driver of the post-2017 incorporation trend among portfolio landlords - the Section 24 hit on high-leverage portfolios held personally can exceed the entire net cash profit, whereas a company structure preserves full interest deduction. Incorporating an existing portfolio triggers SDLT and CGT charges on transfer, however, so the corporate route is usually a long-term play for new acquisitions rather than a retrospective conversion of personally held property.

13. Related calculators and guides

• Stamp Duty calculator - model the 5% additional dwelling surcharge on a BTL purchase.
• Capital Gains Tax calculator - estimate the 18/24% bill on a residential property disposal.
• Corporation Tax calculator - model returns inside a property company outside Section 24.
• Self-employed calculator - relevant where letting activity is recharacterised as a trade.
• High Income Child Benefit Charge - interaction between Section 24-inflated income and HICBC.
• £100,000 tax trap - personal allowance taper triggered by inflated rental profit.
• UK tax relief guide - the broader catalogue of reliefs that interact with property income.
• Self Assessment step by step - filing the property pages on the current SA100.
• SalaryTax methodology - how every figure on this guide is sourced and verified.