How to Report Rental Income in the UK: Tax Rules, Thresholds & Self Assessment Explained
If you are a landlord in the UK, you must report your rental income to HM Revenue & Customs (HMRC) and pay tax on your profits. In most cases, you will need to complete a Self Assessment tax return unless your total rental income is below the £1,000 property allowance. The process varies depending on your rental earnings, expenses, and ownership structure (individual, joint ownership, or company).
Understanding Rental Income Tax Thresholds (2024/25)
The UK tax system categorizes rental income under personal income tax or corporation tax (if a company owns the property). Below are the latest tax thresholds for individual landlords in the 2024/25 tax year:
Tax Band | Income Range (2024/25) | Tax Rate |
Personal Allowance | Up to £12,570 | 0% |
Basic Rate | £12,571 - £50,270 | 20% |
Higher Rate | £50,271 - £125,140 | 40% |
Additional Rate | Over £125,140 | 45% |
Property Allowance and When You Need to Report
£1,000 or less: You don’t need to report your rental income to HMRC because it falls within the property allowance.
£1,001 - £2,500: You must inform HMRC but don’t necessarily need a tax return.
£2,501 - £10,000 (before expenses) or £2,500+ (after expenses): You must file a Self Assessment tax return.
£10,000+ before expenses: Mandatory Self Assessment filing.
If you haven’t previously filed a Self Assessment tax return but need to do so, you must register with HMRC by 5 October following the end of the tax year.
What Counts as Taxable Rental Income?
Rental income isn’t just about the rent you receive. HMRC considers various income sources under the rental income umbrella, including:
Tenant rent payments
Non-refundable deposits (e.g., if a tenant leaves without getting their deposit back)
Payments for services (cleaning, gardening, or maintenance fees paid by tenants)
Other income (e.g., insurance payouts for lost rent)
Example 1: Basic Rental Income Calculation
Suppose you own a property and receive £18,000 in rent per year. You also charge tenants £600 for gardening services, making your total taxable income £18,600. You can deduct allowable expenses (explained in Part 2) before calculating your tax bill.
How to Report Rental Income on a Self Assessment Tax Return
To declare rental income, you must complete the SA100 Self Assessment form and the SA105 supplementary form for property income.
Steps to Report Rental Income:
Register for Self Assessment: If you haven’t filed a tax return before, register by 5 October.
Gather Your Records: Keep a record of rental payments, expenses, and receipts.
Complete the SA105 Form: Report rental income and expenses in the "UK Property" section.
Submit Your Tax Return: The deadline is 31 January for online filing (31 October for paper returns).
Pay Any Tax Due: The payment deadline is 31 January (same as the filing deadline).
Example 2: Self Assessment for a Landlord
Sarah owns a buy-to-let property. She earns £12,000 per year in rent, with £3,000 in allowable expenses (mortgage interest, maintenance, etc.). Her taxable income is £9,000.
Since her income after expenses is above £2,500, she must complete a Self Assessment tax return.
If she earns less than £1,000 in rental income, she wouldn't need to report it.
What If You Forget to Declare Rental Income?
If you failed to report past rental income, you must make a voluntary disclosure via the Let Property Campaign. This allows you to correct unpaid tax with reduced penalties.
Penalties for late declarations can range from 0% to 100% of unpaid tax, depending on whether the omission was accidental or deliberate.
What If You Own a Property Through a Company?
If you rent out property via a limited company, rental income is taxed under Corporation Tax instead of Income Tax. The 2024/25 Corporation Tax rate is:
19% for profits under £50,000
25% for profits over £250,000
Marginal relief for profits between £50,000 and £250,000
The company must file a Company Tax Return (CT600) and pay tax within 9 months and 1 day after the end of its accounting period.
Joint Ownership: Who Pays Tax?
If you own a rental property with someone else:
Married Couples & Civil Partners: Profits are split 50/50 unless a different ratio is declared via Form 17.
Non-married Co-owners: Tax is based on each person’s share of the rental income.
Example 3: Joint Ownership Reporting
John and his wife jointly own a rental property earning £20,000 per year.
By default, each reports £10,000.
If they wish to report in a different proportion (e.g., 80/20), they must submit Form 17 with evidence of ownership split.
Rental Income Tax Deductions: Allowable Expenses, Reliefs & Legal Ways to Reduce Tax
Now, we’ll take a deep dive into allowable expenses, tax reliefs, and strategies landlords can use to reduce their tax bills legally.
Understanding what expenses you can claim and how tax relief works can significantly impact your final tax bill, so let’s break it down step by step.
Allowable Expenses: What Landlords Can Deduct from Rental Income
When calculating how much tax you owe on rental income, you’re allowed to deduct certain expenses before paying tax. These expenses must be “wholly and exclusively” related to renting out your property.
Key Allowable Expenses for Landlords (2024/25)
Expense Category | Examples |
Property Management Costs | Letting agent fees, property management fees |
Legal & Professional Fees | Solicitor costs for short-term leases, accountant fees, eviction costs |
Repairs & Maintenance | Fixing a boiler, repainting walls, repairing plumbing (but not improvements) |
Utility Bills (if paid by landlord) | Gas, electricity, water, broadband |
Council Tax & Service Charges | If paid by the landlord, not the tenant |
Landlord Insurance | Buildings, contents, rent guarantee insurance |
Ground Rent & Leasehold Fees | If applicable for leasehold properties |
Cleaning & Gardening Services | Regular or end-of-tenancy cleaning, communal garden maintenance |
Advertising & Tenant-Finding Costs | Listing fees on platforms like Rightmove or Zoopla |
Direct Costs | Phone calls, printing tenancy agreements, stationery |
🚨 Important Note:
You cannot claim for improvements (e.g., adding an extension, installing a new kitchen). These are capital expenses and subject to Capital Gains Tax rules instead.
If you replace an item like a fridge, sofa, or bed, you may claim Replacement of Domestic Items Relief (explained below).
Replacement of Domestic Items Relief (RDI Relief)
If you replace old household items with new ones for tenants, you may be able to claim Replacement of Domestic Items Relief instead of counting it as a capital expense.
What Can You Claim?
Sofas
Beds & mattresses
Curtains
Carpets
White goods (fridges, washing machines, ovens)
Crockery & cutlery
Conditions for Claiming RDI Relief
The new item must replace an existing one that is no longer in use.
The old item must have been used solely by tenants.
The new item must be like-for-like (not an upgrade).
Example: Claiming Replacement of Domestic Items Relief
Emma, a landlord, replaces an old fridge for her tenants at a cost of £450. The old fridge was disposed of, and the new fridge serves the same purpose. Emma can claim £450 as an allowable expense under RDI Relief.
Mortgage Interest Tax Relief
Mortgage interest used to be fully deductible, but as of April 2020, landlords cannot deduct mortgage interest from rental income. Instead, they receive a 20% tax credit on their mortgage interest payments.
Example: How Mortgage Interest Relief Works
Ben owns a rental property and pays £6,000 in mortgage interest per year.
He cannot deduct this from rental income.
Instead, he gets a 20% tax credit (£6,000 × 20% = £1,200), which reduces his final tax bill.
🚨 Important for Higher Rate Taxpayers:
If you’re in the 40% tax bracket, you now only get 20% relief, meaning you pay more tax than before.
Can You Avoid This Restriction?
Some landlords set up a limited company to claim full mortgage interest deductions.
However, Corporation Tax (19%-25%) applies, and Stamp Duty Land Tax (SDLT) may be due if transferring properties into a company.
Wear and Tear Allowance (Only for Older Tax Years)
The Wear and Tear Allowance, which allowed landlords of furnished properties to claim 10% of rent, was scrapped in April 2016. Now, landlords must claim actual replacement costs via RDI Relief.
Furnished Holiday Let (FHL) Tax Benefits
If you rent out a furnished holiday home, it may qualify as a Furnished Holiday Let (FHL), giving you extra tax advantages.
To qualify as an FHL, the property must:
Be available to let at least 210 days a year
Be actually let for at least 105 days a year
Not have long-term lets exceeding 155 days per year
FHL Tax Benefits
✅ Claim Capital Allowances: Deduct the cost of furniture, appliances, and equipment
✅ Lower Capital Gains Tax (CGT): Qualifies for Business Asset Disposal Relief (BADR)
✅ Pension Contributions: Profits count as earned income, allowing for higher pension contributions
🚨 Changes in 2025: The government has hinted at phasing out some FHL benefits, so check for updates!
Making a Loss on Rental Income: What Can You Do?
If your rental expenses exceed your rental income, you make a loss. You cannot offset rental losses against other income (e.g., salary), but you can carry them forward to offset future rental profits.
Example: Carrying Forward a Loss
Tom’s rental income in 2024/25 is £8,000, but expenses total £10,000, resulting in a £2,000 loss.
He pays £0 tax in 2024/25.
The £2,000 loss carries forward to 2025/26, reducing taxable profits that year.
Claiming Capital Allowances for Commercial Properties
If you rent out commercial properties (e.g., offices, shops, warehouses), you can claim Capital Allowances on certain expenses:
Fixtures & fittings (e.g., air conditioning, lifts)
Security systems
Fire alarms & safety features
Advanced Tax Strategies for Landlords: Avoiding Common Mistakes & HMRC Penalties on Rental Income
Now, we’ll focus on advanced tax-saving strategies, common pitfalls landlords should avoid, and HMRC penalties for non-compliance.
If you’re a UK landlord, understanding these rules can help you legally reduce your tax bill and avoid costly mistakes. Let’s get into it!
Tax-Efficient Strategies for Landlords
Many landlords pay more tax than they need to because they don’t use legal tax-saving methods. Here are some strategies to maximize profits and minimize tax liability.
1. Holding Property in a Limited Company (SPV)
One of the most common tax strategies is purchasing rental properties through a Special Purpose Vehicle (SPV)—a limited company set up specifically for property rental.
Advantages of Holding Property in a Company
✅ Full Mortgage Interest Deduction – Unlike individual landlords (who get only a 20% tax credit), companies can deduct 100% of mortgage interest as an expense.
✅ Lower Corporation Tax – Rental profits are taxed at 19%-25% (instead of up to 45% for higher-rate taxpayers).
✅ More Tax-Efficient Profit Extraction – Landlords can pay themselves dividends (taxed at lower rates) or reinvest profits into new properties.
✅ Limited Personal Liability – Your personal assets are separate from company liabilities.
Disadvantages
🚨 Higher Admin & Costs – You need to file annual accounts with Companies House and pay for accounting services.
🚨 Higher Mortgage Rates – Buy-to-let mortgages for limited companies usually have higher interest rates than personal mortgages.
🚨 Stamp Duty & CGT on Transfers – Moving existing properties into a company can trigger Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT).
Example: Buying Through a Company vs. Personal Ownership
David, a higher-rate taxpayer, earns £30,000 in rental profits:
As an individual, he pays 40% tax, meaning he keeps only £18,000 after tax.
As a company, he pays 19% Corporation Tax, leaving £24,300 after tax (if reinvested).
For landlords reinvesting profits, an SPV can be a game-changer.
2. Transferring Property to a Spouse (To Lower Tax Liability)
If one spouse is in a lower tax bracket, transferring property ownership can reduce tax liability.
✅ Basic Rate Taxpayer (20%) vs. Higher Rate Taxpayer (40%) – If your spouse earns less than £50,270, rental income taxed at 20% instead of 40% could cut your tax bill in half.
✅ Use Form 17 – You can legally adjust property income split between spouses.
Example: Spouse Tax Transfer
Emma is a higher-rate taxpayer (40%), while her husband, John, is a basic-rate taxpayer (20%). She transfers her £12,000 rental income property to John.
Instead of paying £4,800 tax (40%), John now pays £2,400 (20%), saving them £2,400 per year.
🚨 Beware: If you transfer a mortgage along with the property, Stamp Duty Land Tax (SDLT) may apply.
3. Claiming Private Residence Relief & Lettings Relief
If you once lived in a rental property before letting it out, you may qualify for Private Residence Relief (PRR) & Lettings Relief when you sell it.
✅ Private Residence Relief (PRR) – If you lived in the property before renting it, you don’t pay Capital Gains Tax (CGT) on the years you lived there + the final 9 months.
✅ Lettings Relief – If you let out a former main home, you could claim up to £40,000 of CGT relief (£80,000 for couples).
Example: Selling a Former Home with PRR & Lettings Relief
Olivia bought a house in 2010 for £200,000 and lived in it for 5 years.
She rented it out from 2015-2024.
She sells it in 2024 for £350,000, making a £150,000 gain.
How is CGT calculated?
5 years of residence + last 9 months = Tax-free under PRR.
Lettings relief = Up to £40,000 tax-free.
CGT only applies to remaining gains.
🚨 CGT Rates on Property (2024/25)
18% for basic-rate taxpayers
24% for higher-rate taxpayers (Increased from 28% in 2024)
Common Mistakes Landlords Should Avoid
🚫 1. Failing to Register for Self Assessment on Time
Deadline: 5 October after the tax year you start receiving rental income.
Late registration = £100+ fine.
🚫 2. Missing the Tax Return Deadline
Paper filing deadline: 31 October.
Online filing deadline: 31 January.
Late penalty: £100 + daily fines after 3 months.
🚫 3. Incorrectly Reporting Rental Losses
You cannot offset rental losses against salary income.
Losses carry forward to offset future rental profits only.
🚫 4. Not Keeping Proper Records
You must keep records for at least 6 years.
HMRC can issue penalties if records are missing.
🚫 5. Ignoring the Let Property Campaign (for Undeclared Income)
If you forgot to declare past rental income, use HMRC’s Let Property Campaign to avoid harsh penalties.
HMRC Penalties for Non-Compliance
Penalties for Late Tax Returns & Payments (2024/25)
Delay | Penalty |
Missed 31 January deadline | £100 fine (even if no tax due) |
3 months late | £10 per day fine (up to £900) |
6 months late | 5% of tax due or £300 (whichever is higher) |
12 months late | Up to 100% of unpaid tax |
🚨 Failure to declare rental income could result in penalties up to 100% of unpaid tax.
By understanding and applying these tax strategies, landlords can legally minimize tax bills, avoid penalties, and maximize profits.
🔹 Set up an SPV if growing your portfolio
🔹 Use a spouse’s tax allowance to lower tax liability🔹 Claim all allowable expenses & reliefs
🔹 File Self Assessment on time to avoid fines
By staying compliant and proactive, you can keep more of your rental income while staying on the right side of HMRC.
FAQs
Q1. Do you need to report rental income if you rent out a room in your own home?
A. If you rent out a room in your home, you may qualify for the Rent a Room Scheme, which allows you to earn up to £7,500 per year tax-free (or £3,750 if you share the income with a partner). If your rental income exceeds this threshold, you must declare the excess to HMRC through a Self Assessment tax return.
Q2. Can you claim tax relief on rental income if your property is empty?
A. You cannot claim tax relief simply because a property is vacant. However, if you are actively trying to rent it out, certain expenses (like council tax, utilities, and maintenance) may still be deductible. If the property is being renovated or repaired for future letting, these costs might count as capital expenses rather than deductible expenses.
Q3. How does rental income affect your personal tax code?
A. Rental income is taxed separately under Self Assessment, so it does not automatically change your tax code. However, if you have modest rental income, HMRC may adjust your PAYE tax code to collect rental tax automatically rather than requiring a tax return. You can check or change your tax code through your Personal Tax Account on GOV.UK.
Q4. Do you have to pay National Insurance on rental income?
A. In most cases, landlords do not pay National Insurance on rental income. However, if letting properties is your main source of income, or if you actively manage multiple properties (like a business), HMRC may classify you as being self-employed as a landlord, making you liable for Class 2 National Insurance Contributions (NICs).
Q5. Can you use rental losses to reduce tax on your salary or other income?
A. No, rental losses cannot be offset against salary or other sources of income. You can only carry forward rental losses to offset against future rental profits in the same property business. Losses from one rental property can be used to reduce profits from another, but they cannot be deducted from employment income or dividends.
Q6. Can you reduce tax by splitting rental income between family members?
A. Yes, but you must legally transfer ownership interest in the property. If you jointly own a property with a spouse or civil partner, rental income is automatically split 50/50, unless you submit Form 17 to HMRC with proof of an unequal ownership share. For other family members, a legal transfer of ownership is required to adjust tax liability.
Q7. How long do you need to keep records of rental income and expenses?
A. HMRC requires landlords to keep detailed records for at least 6 years. This includes rental agreements, invoices, receipts for expenses, mortgage statements, and tax return submissions. Failure to keep adequate records can result in penalties if HMRC investigates your tax affairs.
Q8. Is rental income taxable if you rent to family members below market rate?
A. Yes, but if you rent below market value (e.g., to family members), you cannot claim full tax relief on expenses. Your allowable expenses cannot exceed the rent received, which means you may lose certain deductions that regular landlords can claim.
Q9. Do foreign landlords need to report UK rental income?
A. Yes, if you are a non-UK resident landlord, you must report UK rental income to HMRC and may be subject to UK Income Tax. Tenants or letting agents may be required to deduct tax at source unless you apply to receive rent gross under the Non-Resident Landlord Scheme (NRLS).
Q10. Can you delay paying tax on rental income if you reinvest it in property improvements?
A. No, rental income is taxable in the year it is received, even if you reinvest it into property improvements. However, certain improvements may qualify as capital expenses, which could reduce Capital Gains Tax (CGT) when you sell the property in the future.
Q11. Does Airbnb rental income need to be declared to HMRC?
A. Yes, Airbnb and short-term let income is taxable. If your earnings exceed £1,000 per year, you must declare it. If your property qualifies as a Furnished Holiday Let (FHL), you may be eligible for special tax reliefs, including Capital Allowances and lower CGT rates.
Q12. How does rental income affect your eligibility for child benefits?
A. If rental income increases your total taxable income above £50,000, you may have to repay some or all of your Child Benefit under the High Income Child Benefit Charge (HICBC). If your income exceeds £60,000, you may lose Child Benefit entirely.
Q13. Are landlords affected by Making Tax Digital (MTD) in 2024?
A. Yes, landlords earning over £50,000 per year must comply with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) from April 2026 (previously set for 2024 but delayed). This means quarterly digital reporting instead of annual tax returns. Those earning £30,000-£50,000 will join from April 2027.
Q14. Do you have to declare rental income if you only rent out for a few months a year?
A. Yes, rental income is taxable regardless of duration. However, if it falls under £1,000 per tax year, you may qualify for the Property Allowance, meaning you don’t need to report it.
Q15. Can you get a tax refund if you overpay tax on rental income?
A. Yes, if you overpay tax on rental income, you can claim a refund from HMRC. Refunds are usually issued after you file your Self Assessment tax return, and the process can take a few weeks to months, depending on HMRC processing times.
Q16. Do you have to pay Stamp Duty Land Tax (SDLT) on inherited rental properties?
A. No, SDLT does not apply to inherited properties. However, if you transfer ownership of an inherited rental property with an existing mortgage, SDLT may be payable on the mortgage balance.
Q17. How does rental income affect your student loan repayments?
A. If you have a student loan, HMRC will consider rental income when calculating your repayment threshold. If your total taxable income exceeds £22,015 (Plan 1) or £27,295 (Plan 2), repayments will be deducted at 9% of income above the threshold.
Q18. Can you pay rental income tax in installments?
A. Yes, if you owe more than £1,000 in tax and pay through Self Assessment, you may have to make Payments on Account (advance tax payments for the next year). If you cannot pay in full, you can apply for a Time to Pay arrangement with HMRC.
Q19. What happens if you sell a rental property at a loss?
A. If you sell a rental property for less than its purchase price, you may have a Capital Gains Tax (CGT) loss. You can carry forward the loss and offset it against future capital gains, but not against rental income or other earnings.
Q20. Do you need a separate bank account for rental income?
A. While not legally required, having a separate bank account for rental income and expenses can make tax filing much easier. If you operate through a limited company, a separate business account is required for compliance.
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