UK Landlord Tax Guide 2026/27: Everything Property Investors Need to Know
Being a landlord in the UK comes with significant tax obligations. From Income Tax on rental profits to Capital Gains Tax when you sell, plus the Section 24 mortgage interest restriction and Making Tax Digital requirements — there's a lot to understand.
This comprehensive guide covers all the taxes landlords face in 2026/27 and how to minimise your liability legally.
How Rental Income is Taxed
Rental income is taxed as part of your total income at your marginal rate:
Income Tax Rates on Rental Profit 2026/27
| Tax Band | Rate | Threshold |
|---|---|---|
| Personal Allowance | 0% | Up to £12,570 |
| Basic Rate | 20% | £12,571 - £50,270 |
| Higher Rate | 40% | £50,271 - £125,140 |
| Additional Rate | 45% | Over £125,140 |
Your rental profit = Gross rent received minus allowable expenses
Allowable Landlord Expenses
What You CAN Deduct
Property Costs:
- Letting agent fees
- Legal fees for short leases (under 1 year)
- Accountant fees
- Insurance (buildings, contents, landlord)
- Ground rent and service charges
- Council tax (if you pay it)
- Utility bills (if included in rent)
Repairs and Maintenance:
- General repairs (not improvements)
- Redecorating between tenants
- Gardening and cleaning
- Pest control
- Boiler servicing and repairs
Administrative:
- Advertising for tenants
- Stationery and phone costs
- Travel to property for management
- Safety certificates (gas, electrical, EPC)
- Professional memberships
What You CANNOT Deduct
- Personal use of the property
- Capital improvements (new extensions, conversions)
- Initial property purchase costs
- Mortgage capital repayments (only interest)
- Penalties and fines
Section 24: Mortgage Interest Restriction
Since April 2020, landlords can no longer deduct mortgage interest from rental income. Instead, you receive a basic rate tax credit.
How Section 24 Works
Old System (Pre-2020):
- Deduct full mortgage interest from rental income
- Pay tax on the net profit
Current System:
- Calculate rental profit WITHOUT deducting mortgage interest
- Pay tax on this higher profit
- Receive 20% tax credit on mortgage interest
Section 24 Impact Example
Rental income: £15,000 Mortgage interest: £8,000 Other expenses: £2,000
Basic Rate Taxpayer:
| Old System | New System |
|---|---|
| Profit: £5,000 | Profit: £13,000 |
| Tax (20%): £1,000 | Tax (20%): £2,600 |
| Credit (20% of £8k): £1,600 | |
| Total tax: £1,000 | Total tax: £1,000 |
Higher Rate Taxpayer:
| Old System | New System |
|---|---|
| Profit: £5,000 | Profit: £13,000 |
| Tax (40%): £2,000 | Tax (40%): £5,200 |
| Credit (20% of £8k): £1,600 | |
| Total tax: £2,000 | Total tax: £3,600 |
Impact: Higher rate taxpayers pay £1,600 MORE per year on this example property.
Capital Gains Tax on Property
When you sell a rental property, you may owe Capital Gains Tax (CGT) on the profit.
CGT Rates on Property 2026/27
| Tax Band | CGT Rate |
|---|---|
| Basic Rate | 18% |
| Higher Rate | 24% |
CGT Calculation Example
Purchase price (2015): £200,000 Sale price (2026): £350,000 Selling costs: £10,000 Improvements: £15,000
| Step | Amount |
|---|---|
| Sale price | £350,000 |
| Less: Purchase price | £200,000 |
| Less: Selling costs | £10,000 |
| Less: Improvements | £15,000 |
| Gain | £125,000 |
| Less: Annual Exemption | £3,000 |
| Taxable Gain | £122,000 |
CGT payable (higher rate): £122,000 × 24% = £29,280
60-Day Reporting Rule
You must report and pay CGT on UK residential property within 60 days of completion. Failure to do so results in penalties.
Stamp Duty for Landlords
Buy-to-let purchases attract a 3% surcharge on top of standard rates.
Stamp Duty Rates 2026/27 (Additional Properties)
| Property Value | Standard Rate | BTL Rate |
|---|---|---|
| Up to £125,000 | 0% | 3% |
| £125,001 - £250,000 | 2% | 5% |
| £250,001 - £925,000 | 5% | 8% |
| £925,001 - £1.5m | 10% | 13% |
| Over £1.5m | 12% | 15% |
Stamp Duty Example
BTL property: £300,000
| Portion | Rate | Tax |
|---|---|---|
| First £125,000 | 3% | £3,750 |
| Next £125,000 | 5% | £6,250 |
| Next £50,000 | 8% | £4,000 |
| Total | £14,000 |
Making Tax Digital for Landlords
From April 2026, landlords with gross property income over £50,000 must comply with MTD ITSA.
MTD Requirements for Landlords
- Digital record keeping using MTD-compatible software
- Quarterly updates to HMRC (4 per year)
- End of Period Statement after each tax year
- Final Declaration by 31 January
MTD Deadlines for Landlords 2026/27
| Quarter | Covers | Deadline |
|---|---|---|
| Q1 | Apr-Jun | 7 August |
| Q2 | Jul-Sep | 7 November |
| Q3 | Oct-Dec | 7 February |
| Q4 | Jan-Mar | 7 May |
| EOPS | Full year | 31 January |
Property Income Allowance
If your gross rental income is under £1,000, you don't need to report it. This is the Property Income Allowance.
For income between £1,000 and actual expenses, you can choose:
- Deduct actual expenses, OR
- Claim the £1,000 allowance (no receipts needed)
Should You Hold Property in a Limited Company?
For new purchases, a company structure may be more tax-efficient:
Individual vs Company Comparison
| Factor | Individual | Company |
|---|---|---|
| Mortgage interest | 20% credit only | Full deduction |
| Corporation Tax | N/A | 25% |
| Extracting profits | N/A | Dividend tax |
| CGT on sale | 18%/24% | Company pays CT, then extraction |
When Company Ownership Makes Sense
- Higher/additional rate taxpayer
- Significant mortgage borrowing
- Long-term investment horizon
- Building a portfolio
- Planning to pass to children
When Individual Ownership Makes Sense
- Basic rate taxpayer
- Little/no mortgage
- Planning to sell soon
- Main residence relief may apply
Frequently Asked Questions
How much tax do I pay as a landlord UK?
You pay Income Tax on your rental profit at your marginal rate (20%, 40%, or 45%). You also pay CGT when selling (18% or 24%) and 3% extra stamp duty when buying.
What is Section 24 and does it affect me?
Section 24 restricts mortgage interest relief for individual landlords. You now receive a 20% tax credit instead of deducting interest. It affects higher rate taxpayers most significantly.
Do I need to register for Making Tax Digital as a landlord?
If your gross rental income exceeds £50,000, you must register for MTD ITSA from April 2026. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028.
Can I offset rental losses against other income?
Rental losses can only be offset against future rental profits, not other income. Carry forward indefinitely until you have rental profits.
How quickly must I pay CGT when selling a rental property?
You must report and pay CGT within 60 days of completing the sale. Late reporting incurs penalties.
Related Calculators
- Rental Yield Calculator - Calculate rental returns
- Capital Gains Tax Calculator - Property CGT calculator
- Stamp Duty Calculator - Calculate SDLT including surcharge
- Landlord Tax Calculator - Complete landlord tax planning