If you earn rental income — from a buy-to-let, a spare room, a holiday let, or an Airbnb — the UK tax system treats it as property income, not trading income (unless you’re running a hotel-level operation). The rules are different from self-employment tax in several important ways: mortgage interest isn’t fully deductible, there’s a separate set of SA pages, and there are special schemes for rent-a-room, non-resident landlords, and (until April 2025) furnished holiday lets.

This hub maps the whole property tax system for UK landlords and links to the detailed guide for each specific scenario — the FHL abolition, MTD for landlords, and recording short-term let income.

What Is Property Tax for Landlords?

Property tax for landlords is the Income Tax you pay on rental income, reported on the SA105 pages of your Self Assessment. Your taxable profit is gross rental income minus allowable expenses, and it’s added to your other income and taxed at your marginal rate (20%, 40%, or 45%). Since 2017, Section 24 has restricted mortgage interest relief to a 20% tax credit for residential landlords — a significant cost for higher-rate taxpayers. There is no special “rental tax rate”; rental profit is simply income.

1. The three property income regimes

Not all property income is treated the same way. Which regime you’re in determines what expenses you can claim, how mortgage interest is treated, and what CGT reliefs apply on sale. There are three regimes to understand:

Standard residential let. The default. You let a property (furnished or unfurnished) on a long-term basis. Mortgage interest is restricted under Section 24 (20% tax credit, not full deduction). You use the replacement of domestic items relief for furniture — no capital allowances. CGT on sale is at residential property rates (18% / 24%). This is where most landlords sit, and where all former FHLs now sit since April 2025.

Short-term let (post-FHL abolition). You let on Airbnb, Booking.com, or directly, but at a level below hotel service — you hand over keys, clean between stays, and don’t provide meals or daily housekeeping. The income is still property income on SA105, taxed the same as a standard residential let. The FHL regime that previously gave this category special tax advantages was abolished on 6 April 2025 — see our FHL abolition guide for what changed.

Trading-level short-term let. If your operation looks like a hotel — multiple properties, daily housekeeping during stays, provided meals, concierge service, direct bookings at scale — the income crosses from property income into trading income (SA103, not SA105). This is the Pawson v HMRC test, and it’s about the level of service, not the number of nights let. Trading income means you can claim capital allowances, mortgage interest is fully deductible (Section 24 doesn’t apply), and different CGT rules apply on sale. For the detail on where the line sits, see our Airbnb income recording guide.

2. How rental income is taxed — the basics

Rental income is reported on the SA105 (UK property) pages of your Self Assessment, not the SA103 self-employment pages. Your taxable profit is calculated as:

Gross rental income (all rent received, before any deductions by agents or platforms) Minus allowable expenses (repairs, insurance, management fees, utilities, council tax, ground rent, service charges — see §5) Minus the £1,000 property income allowance (if you choose it instead of actual expenses and your income is over £1,000) = Taxable rental profit

That profit is then added to your other income (PAYE salary, self-employment profits, dividends, interest) and taxed at your marginal rate — 20% in the basic band, 40% in the higher band, 45% in the additional band. There’s no special “rental tax rate” — rental profit is just income.

One critical difference from self-employment: mortgage interest is not deducted from rental income in this calculation. It’s handled separately under Section 24 (see §4). This is the single biggest change to landlord tax in the last decade, and it catches many new landlords off guard.

If your gross property income is under £1,000, you don’t need to declare it at all — the property income allowance covers it. If you let a furnished room in your own home, the Rent-a-Room scheme gives you £7,500 tax-free instead. For the detail on both, see our Airbnb income recording guide which covers how both allowances work and when to use each.

3. Section 24: mortgage interest relief for residential landlords

Section 24 is the name for the restriction on mortgage interest relief that was phased in from 2017 and fully in effect since April 2020. It’s the single most significant change to UK landlord tax in a generation, and if you’re a higher-rate taxpayer with a mortgage, it probably costs you thousands per year.

Before Section 24: Mortgage interest was a fully deductible expense. If your rental income was £30,000 and mortgage interest was £12,000, your taxable profit was £18,000. A higher-rate taxpayer paid 40% on £18,000 = £7,200.

After Section 24: Mortgage interest is not deducted from rental income. Instead, you receive a 20% tax credit on the mortgage interest, which reduces your overall tax bill. So your taxable profit is now £30,000 (not £18,000), and a higher-rate taxpayer pays 40% on £30,000 = £12,000, then gets a tax credit of 20% × £12,000 = £2,400, for a net tax bill of £9,600 — £2,400 more than before.

The impact is asymmetric:

  • Basic-rate taxpayers are largely unaffected — the 20% tax credit roughly equals the 20% they’d have saved by deducting the interest.
  • Higher-rate and additional-rate taxpayers lose out significantly — they pay 40% or 45% on the profit that includes the mortgage interest, but only get 20% relief on the interest itself. The effective tax rate on the mortgage interest portion is 20% or 25%.
  • Landlords near the £100,000 threshold can be pushed into the higher band or into the Personal Allowance taper by the inflated profit figure, creating a double hit.

Section 24 applies to all residential property income, including former FHLs since April 2025. It does not apply to commercial lets or to trading-level short-term lets (where mortgage interest is still fully deductible as a trading expense). For the worked examples and how Section 24 interacts with the FHL abolition specifically, see our FHL abolition guide.

4. What expenses can residential landlords deduct?

You can deduct expenses that are wholly and exclusively for the purposes of your property rental business. The main deductible expenses are:

  • Repairs and maintenance — fixing a broken boiler, replacing a damaged window, repainting. (Note: improvements — like adding an extension or upgrading to a higher-spec kitchen — are not deductible, only like-for-like replacements and repairs.)
  • Insurance — buildings, contents, public liability, landlord insurance.
  • Management fees — letting agent fees, property management charges.
  • Utilities — gas, electricity, water, if you pay them rather than the tenant.
  • Council tax and rates — if you pay them (e.g. during void periods).
  • Ground rent and service charges — for leasehold properties.
  • Legal and professional fees — accountancy for the rental business, legal fees for drawing up tenancy agreements (but not for buying or selling the property — those are capital costs).
  • Cleaning and gardening — between tenancies or for communal areas.
  • Replacement of domestic items relief — when you replace furniture, appliances, or kitchenware (but not when buying new items for the first time). You deduct the cost of the replacement, not the original purchase.
  • Travel costs — visiting the property for inspections, repairs, or management (but not commuting to your own rental property if it’s also your workplace).

What you cannot deduct:

  • Mortgage interest (handled under Section 24 — see §3)
  • Capital costs — the purchase price of the property, improvements, initial furnishing
  • Personal expenses — anything not wholly and exclusively for the rental business
  • Your own labour — if you do repairs yourself, you can’t deduct a notional cost for your time

For the practical detail on recording these expenses in accounting software (including how to split Airbnb payouts and handle occupancy taxes), see our Airbnb income recording guide.

5. The Non-Resident Landlord Scheme

If you live outside the UK but earn UK rental income, you’re still taxable on it — UK property income is taxable in the UK regardless of where you live. The mechanism for collecting that tax is the Non-Resident Landlord (NRL) Scheme, and it works differently from the standard Self Assessment route.

Under the NRL Scheme, your letting agent or tenant (if no agent is involved) must deduct 20% basic-rate tax from the rent before paying it to you, and remit that tax to HMRC quarterly. This is a withholding mechanism — the tax is taken at source, like PAYE for employees.

You can opt out of the withholding and receive your rent gross (with no tax deducted at source) by registering with HMRC using form NRL1. To qualify, you must have a UK Self Assessment filing history and be up to date with your tax obligations. If approved, you receive rent gross and then report and pay the tax through Self Assessment instead — which lets you deduct expenses before calculating tax, rather than having 20% taken off the gross.

Key points:

  • The 20% withholding is on gross rent, not on profit — so it can be significantly more than your actual tax liability if you have large expenses or a mortgage. Registering for gross payment via NRL1 and filing a Self Assessment usually results in a refund of the excess.
  • If you have a letting agent, they handle the withholding and the NRL registration. If you don’t use an agent and your tenant pays you directly, the tenant is responsible for withholding — but only if your gross rent exceeds £100/week.
  • The scheme applies to all UK property income for non-residents, including from former FHLs and short-term lets.
  • For how UK property income counts toward the MTD qualifying income threshold for non-resident landlords, see our MTD for landlords guide.

6. Capital gains when you sell a rental property

When you sell a rental property for more than you paid for it, the gain is subject to Capital Gains Tax (CGT) at residential property rates — 18% for basic-rate taxpayers, 24% for higher and additional-rate taxpayers. These rates are higher than the standard CGT rates (10% and 20%) that apply to most other assets.

What you’re taxed on:

  • Disposal proceeds (sale price)
  • Minus acquisition cost (original purchase price, plus purchase costs like SDLT, legal fees, survey)
  • Minus improvement costs (capital improvements that enhanced the property — not repairs, which are revenue expenses)
  • Minus selling costs (estate agent fees, legal fees for the sale)
  • Minus the annual exempt amount (£3,000 for 2025/26 and 2026/27 — this is a per-individual allowance, not per-property)
  • = Taxable gain

The tax rate depends on your total income for the year — if the gain pushes you from the basic band into the higher band, the portion in the higher band is taxed at 24%.

The 60-day reporting rule: Since April 2020, you must report the gain and pay the CGT to HMRC within 60 days of completion (not exchange), using a residential property return. This is much faster than the normal Self Assessment cycle, and missing it triggers interest and penalties. You file the return through your HMRC online account or the Capital Gains Tax on UK property service.

Reliefs that may apply:

  • Private Residence Relief — if the property was ever your main home, the period you lived there (plus the final 9 months of ownership) is exempt from CGT. Letting relief (which used to exempt up to £40,000 of the let period) was restricted from April 2020 and is now only available if you lived in the property with the tenant.
  • Losses — if you sell a rental property at a loss, the loss can be offset against other capital gains in the same year or carried forward.
  • Business Asset Disposal Relief (BADR) — no longer available for former FHLs sold on or after 6 April 2025. See our FHL abolition guide for the detail.

7. What changed when the FHL regime ended

The Furnished Holiday Let tax regime was abolished on 6 April 2025. Former FHLs are now standard residential rentals, and four tax advantages disappeared: full mortgage interest deduction (now Section 24), capital allowances on furniture (now replacement of domestic items relief only), BADR at 10% on disposal (now standard residential CGT rates), and profits counting as relevant earnings for pension contributions. For the full breakdown of every change, the worked examples, and the action checklist for former FHL owners, see our FHL abolition guide.

8. How Making Tax Digital works for landlords

If your UK property income profit exceeds £50,000, you’re mandated for MTD from April 2026 (the threshold drops to £30,000 in April 2027 and £20,000 in April 2028). UK property income counts toward your qualifying income regardless of where you live, and if you’re both a landlord and a sole trader, your property and self-employment income are combined for the threshold. For the full MTD rules for landlords — including non-resident landlords, joint ownership, letting agents, and ceasing rental income — see our MTD for landlords guide.

9. How to record short-term let income

If you’re an Airbnb or short-term let host, the practical recording question — gross booking value vs net payout, how to split fees, which SA pages to file on, and how to set it up in Xero or other MTD-compatible software — has its own detailed guide. For the worked Xero example, the Rent-a-Room vs £1,000 property allowance decision, and the property-vs-trading-income test, see our Airbnb income recording guide.

The bottom line

  1. Rental income is property income on SA105, not trading income — unless you’re running a hotel-level operation.
  2. Section 24 is the biggest cost for mortgaged landlords — mortgage interest gets a 20% tax credit, not full deduction, and the impact is worst for higher-rate taxpayers.
  3. You can deduct repairs, insurance, management fees, utilities, and replacement furniture — but not mortgage interest, capital costs, or improvements.
  4. The £1,000 property income allowance and Rent-a-Room (£7,500) cover small-scale landlords — you can’t use both on the same income.
  5. Non-resident landlords face 20% withholding at source unless they register with HMRC (form NRL1) to receive rent gross and file Self Assessment.
  6. CGT on rental property is at 18% / 24%, and you must report and pay within 60 days of completion.
  7. The FHL regime ended in April 2025 — former FHLs are now standard residential rentals.
  8. MTD for landlords starts April 2026 if your property income profit exceeds £50,000.

For what changed when the FHL regime was abolished, see our FHL abolition guide. For MTD rules for landlords and non-residents, see our MTD for landlords guide. For how to record Airbnb and short-term let income in accounting software, see our Airbnb income recording guide. For the full MTD roadmap, see our Making Tax Digital guide.

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