Rental income tax basics for landlords

Rental income tax becomes much easier when income, expenses and property records are kept clearly through the year. The main aim is to work out the taxable rental profit correctly and keep enough evidence to support the figures on the tax return.

What counts as rental income

Rental income normally includes rent received from tenants and other payments connected with letting the property. This can include payments for services if they are part of the rental arrangement.

Landlords should keep records of rent received, agent statements, tenant statements, bank receipts, deposits handled through a deposit scheme and any other property income. If a letting agent deducts fees before paying the landlord, the gross rent and the agent fee should still be visible in the records.

Allowable expenses for landlords

GOV.UK guidance explains that allowable expenses are costs incurred wholly and exclusively for the property rental business. Common examples can include letting agent fees, insurance, repairs, maintenance, service charges, ground rent, accountancy fees and other direct costs of letting the property.

Personal expenses are not allowable. Where a cost has both private and rental business use, only the rental business part should be considered.

Repairs, maintenance and improvements

Repairs and maintenance are different from capital improvements. A repair usually restores something to its previous condition. An improvement normally adds something new, upgrades the property beyond its previous condition or forms part of the cost of buying or improving the property.

This distinction matters because repairs may be allowable against rental income, while capital improvements are often considered for Capital Gains Tax when the property is sold. The exact treatment depends on the facts and records.

Mortgage interest and finance costs

For individual landlords of residential property, finance cost relief is restricted. GOV.UK guidance explains that relief for residential property finance costs is generally given as a basic rate Income Tax reduction rather than as a full deduction from rental income.

This is one reason higher rate landlords can be surprised by the tax position. The mortgage payment itself also needs separating between interest and capital repayment. The capital repayment is not the same as mortgage interest.

Jointly owned property

Where property is jointly owned, the tax treatment depends on the ownership, relationship between owners and whether there is a partnership or formal arrangement. HMRC guidance says married couples and civil partners living together are usually treated as entitled to income from jointly held property in equal shares unless specific conditions and declarations apply.

Unmarried joint owners may be taxed according to their actual beneficial shares. Good records are important so each owner reports the correct share of rental income and expenses.

Property held personally or through a company

Some landlords hold property personally and others use a limited company. The tax treatment can be very different. Personal rental income is usually reported through Self Assessment, while company property income is part of the company accounts and Corporation Tax position.

There is no single best answer for everyone. The right structure depends on mortgage arrangements, income needs, long term plans, tax position and commercial factors.

Self Assessment deadlines

Landlords who need to report property income normally do so through Self Assessment. The online tax return and payment deadline is usually 31 January following the end of the tax year. For example, 2025 to 2026 property income is normally reported by 31 January 2027 if filing online.

Some landlords also need to register for Self Assessment by 5 October after the end of the tax year in which the rental income started. Payments on account may also apply depending on the tax position.

Records landlords should keep

Good records make the tax return easier and reduce the risk of missed expenses or unsupported claims. Digital records are especially useful where there are multiple properties, letting agents, mortgage accounts or shared ownership.

When to ask for help

Ask for help if you are unsure which expenses are allowable, mortgage interest has not been separated, the property is jointly owned, you live abroad, you have multiple properties or you are considering using a limited company for property activity.

Durja Associates supports landlords with rental income tax, Self Assessment records and digital organisation so the tax return is built on clearer information.