Renting out a property and not sure how to tell HMRC about it? You're in the right place. Whether you've let a spare flat, moved in with a partner and kept your old house, or built a small portfolio, the rent you collect is usually taxable, and it's your job to report it.
The good news is the process is more straightforward than most landlords fear. You work out your profit, put it on your Self Assessment tax return, and pay tax on the profit at your normal Income Tax rate.
This guide walks you through who needs to declare, what you can deduct, how the mortgage interest rules work, and the key deadlines. There's a full illustrative worked example with current 2025/26 figures so you can see the maths from rent to tax bill.
Do I have to declare rental income?
Most likely, yes. Rental income from property in the UK is taxable, and if you make a profit you need to tell HMRC.
There are a couple of thresholds worth knowing. If your total rental income for the year is £1,000 or less, you usually don't need to report it at all, because it's covered by the property allowance (more on that below). If it's between £1,000 and £2,500 after expenses, you should contact HMRC rather than automatically filing a return. Once your property income is £2,500 or more after allowable expenses, or £10,000 or more before expenses, you'll normally need to complete a Self Assessment tax return.
These figures sit alongside the wider Self Assessment rules. HMRC lists "money from renting out a property" as untaxed income that may require a return. If you already file a return for any other reason, you simply add the property pages to it.
One important point on scope. The Income Tax rates and bands in this guide apply to England, Wales and Northern Ireland. Scotland sets its own Income Tax rates and bands, so Scottish taxpayers should check those separately.
How do I register for Self Assessment as a landlord?
If you don't already complete a tax return, you need to register with HMRC first.
The deadline to register is 5 October following the end of the tax year in which you started receiving rental income. So if you began letting a property during the 2025/26 tax year (6 April 2025 to 5 April 2026), you need to register by 5 October 2026.
When you register, HMRC issues you a Unique Taxpayer Reference (UTR) and sets up your online account. Leave it late and you can end up filing in a rush, so it's worth getting registered early.
If you'd rather not wrestle with the process yourself, our Self Assessment service handles registration, the return and the filing for you.
What counts as rental income?
Rental income is more than just the monthly rent. It includes:
- Rent you receive from tenants
- Payments for the use of furniture
- Charges for additional services you provide, such as cleaning of communal areas, hot water, heating, and repairs to the property
You add all of this up to get your total rental income for the year before working out your profit.
What expenses can I deduct from rental income?
You pay tax on your profit, not your total rent. So you can deduct costs that are incurred wholly and exclusively for renting out the property. Common allowable expenses include:
- General maintenance and repairs (but not improvements)
- Water rates, council tax, gas and electricity where you pay them
- Insurance, such as landlord, buildings and contents policies
- Letting agent and property management fees
- Legal fees for lets of a year or less, or for renewing a lease of less than 50 years
- Accountant's fees
- Ground rents and service charges
- Direct costs such as phone calls, stationery and advertising for new tenants
What you cannot deduct are capital costs. That means the price of the property itself, and improvements that go beyond a like-for-like repair (for example, adding an extension). You also can't deduct the capital portion of your mortgage repayments. Mortgage interest is treated differently, which is the next section.
Keep every receipt and invoice. HMRC can ask you to back up the figures, and good records make the return far quicker to complete. If bookkeeping isn't your thing, our bookkeeping service keeps your property records return-ready.
How does the mortgage interest restriction work?
This trips up a lot of landlords, so it's worth getting clear.
Since 6 April 2020, individual residential landlords can no longer deduct mortgage interest and other finance costs as a normal expense. Instead, you get a "tax reducer" worth 20% of your finance costs, applied after your Income Tax has been calculated.
The reducer is 20% (the basic rate) of the lowest of these three amounts:
- Your finance costs for the year (mortgage interest, interest on loans to buy furnishings, and related fees)
- Your property business profits for the year
- Your adjusted total income above your Personal Allowance (excluding savings and dividend income)
For a basic-rate taxpayer, this usually works out the same as deducting the interest. For higher-rate taxpayers, it's less generous than the old rules, because relief is capped at 20% rather than 40%. The Personal Allowance for 2025/26 is £12,570, the basic rate is 20% and the higher rate is 40%, with higher-rate tax kicking in once your total income passes £50,270.
The worked example below shows the reducer in action.
Should I use the £1,000 property allowance instead?
There's a simpler option for landlords with modest rental income: the property allowance.
You can claim up to £1,000 a year of tax-free property income. If your rental income for the year is £1,000 or less, it's fully covered and you generally don't need to report it.
If your income is above £1,000, you can choose to deduct the £1,000 allowance instead of your actual expenses. The catch is that it's one or the other. If you claim the property allowance, you cannot also deduct your actual expenses.
So the rule of thumb is simple. If your allowable expenses for the year are more than £1,000, claim the actual expenses. If they're less than £1,000, the property allowance will usually save you more. Run both and use whichever gives the lower tax bill.
Worked example: declaring rental income for 2025/26
Illustrative example. Priya is an employed teacher who also lets out a flat. The figures below are for illustration only.
For the 2025/26 tax year, Priya has:
- Employment salary: £30,000
- Rent received: £14,400 (£1,200 a month)
- Allowable expenses (excluding mortgage interest): £2,900
- Mortgage interest: £4,200
Her expenses are well above £1,000, so she claims actual expenses rather than the property allowance.
Step 1: work out the taxable rental profit.
| Item | Amount |
|---|---|
| Rent received | £14,400 |
| Less allowable expenses | (£2,900) |
| Taxable rental profit | £11,500 |
Note that mortgage interest is not deducted here. It's handled by the tax reducer in step 3.
Step 2: work out the Income Tax before the reducer.
Priya's total income is £30,000 salary plus £11,500 rental profit, which is £41,500. After her £12,570 Personal Allowance, her taxable income is £28,930. That's all within the basic-rate band, so the rental profit is taxed at 20%.
Tax on the rental profit: £11,500 x 20% = £2,300.
Step 3: apply the mortgage interest tax reducer.
The reducer is 20% of the lowest of her finance costs (£4,200), her property profit (£11,500) and her adjusted income above the Personal Allowance (well over £4,200). The lowest figure is her finance costs, £4,200.
Tax reducer: £4,200 x 20% = £840.
Step 4: the tax due on the rental income.
| Item | Amount |
|---|---|
| Tax on rental profit | £2,300 |
| Less mortgage interest tax reducer | (£840) |
| Tax due on rental income | £1,460 |
So Priya pays £1,460 of Income Tax on her property for 2025/26, on top of the tax already deducted from her salary through PAYE. Because she's a basic-rate taxpayer, the reducer gives her full relief on her interest. A higher-rate landlord would still only get 20% relief, which is why the restriction bites hardest at the higher rate.
Want to sense-check your own numbers first? Try our Income Tax calculator to estimate the tax on your combined income.
What are the deadlines and how do I pay?
Self Assessment runs to a fixed timetable. For rental income earned in the 2025/26 tax year, the key dates are:
| Deadline | Date |
|---|---|
| Register for Self Assessment | 5 October 2026 |
| Paper tax return | Midnight 31 October 2026 |
| Online tax return | Midnight 31 January 2027 |
| Pay any tax due (balancing payment) | Midnight 31 January 2027 |
| First payment on account (if applicable) | 31 January 2027 |
| Second payment on account (if applicable) | 31 July 2027 |
Most landlords file online, so the date to circle is 31 January 2027. That's both the filing deadline and the date your tax is due.
If your tax bill is large enough, HMRC may also ask for payments on account: advance instalments towards next year's bill, due on 31 January and 31 July. You pay your tax through your online HMRC account by card, bank transfer or direct debit.
One more thing on the horizon. Making Tax Digital for Income Tax starts from 6 April 2026 for sole traders and landlords with qualifying income over £50,000 (based on the 2024/25 tax year). If that's you, you'll need to keep digital records and send quarterly updates through compatible software. It's worth checking now whether you're in scope.
If you've let property for a while and never declared it, don't panic, but do act. HMRC's voluntary disclosure route usually means a lower penalty than waiting to be found. We can help you bring things up to date discreetly.
Frequently asked questions
Do I pay tax on rental income if I make a loss?
No. You only pay tax on a profit. If your allowable expenses exceed your rental income, you make a loss, which you can carry forward to offset against future profits from the same property business. You still report the figures on your return.
Do I need to declare rental income under £1,000?
Usually not. If your total property income for the year is £1,000 or less, it's covered by the property allowance and you generally don't need to report it. Above £1,000 you'll normally need to declare it.
Can I deduct my full mortgage payment from rental income?
No. You can't deduct the capital repayment part of your mortgage at all. The interest part isn't deducted as an expense either. Instead, you get a tax reducer worth 20% of your finance costs, applied after your tax is calculated.
How is rental income taxed if I own the property jointly?
Rental profit from a jointly owned property is usually split according to your share of ownership, and each owner declares their share on their own return. Married couples and civil partners who own jointly are normally taxed 50:50 unless they tell HMRC the split is different and own the property in unequal shares.
What happens if I declare rental income late?
You may face penalties and interest. A late return attracts an automatic penalty, and late payment adds interest plus further penalties the longer it runs. If you've missed previous years, voluntarily disclosing to HMRC usually results in lower penalties than if HMRC contacts you first.
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Get your landlord tax return sorted
Declaring rental income is manageable once you know the steps, but it's easy to miss an allowable expense or get the mortgage interest reducer wrong. If you'd rather have it done properly and on time, Zmartly can handle the whole thing.
We work with landlords every day, from accidental landlords with one flat to growing portfolios. Take a look at how we support landlords, then book a call and we'll take Self Assessment off your plate.
