Rental Income Tax Calculator

Rental profit, not rental income

Tax is charged on rental profit — your rental income minus allowable expenses like letting agent fees, repairs, insurance and other running costs — not on the rent you receive. This calculator takes your income and expenses separately and works out the profit for you.

Why mortgage interest is a credit, not a deduction

Since the Section 24 reforms, mortgage interest and other finance costs are no longer deducted from rental income before tax like a normal expense. Instead, you get a tax reducer worth 20% of your finance costs, applied after your tax has been calculated on the full rental profit. For a higher or additional-rate taxpayer, that 20% credit is worth less than the tax relief they'd have got at their marginal rate before the reform, which is why Section 24 increased many landlords' tax bills even though their actual profit didn't change.

How your other income affects the rate

Rental profit is added on top of your other income (salary, self-employment) to work out which tax band it falls into — it isn't taxed in isolation. A landlord with a full-time job already using their basic-rate band will have their rental profit taxed at 40%, even though the same profit might be taxed at 20% for someone with no other income.

Basic-rate taxpayers vs higher-rate taxpayers

For a basic-rate taxpayer, the 20% finance-cost credit broadly matches the relief they'd have got if interest were still fully deductible, so Section 24 makes little practical difference. For a higher or additional-rate taxpayer, the credit is worth less than the tax saved under the old rules, which is why many landlords have restructured — moving mortgaged property into a company, for example — specifically because of this reform.

What this doesn't cover

This calculator models a single property held personally with straightforward income and expenses. It doesn't cover furnished holiday lettings (which have different rules), jointly owned property splits, the property allowance, or property held inside a limited company, where Corporation Tax applies instead of Income Tax.

A worked example

A landlord with £15,000 rental income, £3,000 of allowable expenses and £6,000 of mortgage interest has a rental profit of £12,000. If they also earn £45,000 from employment, all £12,000 of that rental profit sits in the higher-rate band and is taxed at 40% — £4,800 — before the Section 24 credit. The credit is 20% of the £6,000 finance cost, or £1,200, bringing the final tax on the rental profit down to £3,600. Under the pre-2020 rules, a higher-rate taxpayer would have deducted the mortgage interest before tax and paid 40% on only £6,000 of profit (£2,400) — £1,200 less than under the current rules, which is the practical effect of Section 24 for a higher-rate landlord.

Common mistakes to avoid

The most common error is still deducting mortgage interest as an expense before calculating profit — under Section 24 it must be added back and only claimed as a 20% credit afterwards. HMRC's actual rules also restrict the Section 24 credit in a loss-making or very low-income year, a nuance this simplified calculator doesn't model — worth checking with an adviser if your rental profit is close to zero. Another common mistake is not checking whether the property allowance (a small flat deduction instead of itemised expenses) would give a better result for a very low-expense property — this calculator only models the itemised-expenses route.