Landlord Tax Guide 2026: Everything You Need to Know

Landlord Tax in 2026: The Full Picture

Being a landlord in the UK means navigating multiple taxes: income tax on rental profits, Capital Gains Tax on property sales, Stamp Duty on purchases, and potentially National Insurance depending on your situation. The rules have changed significantly in recent years, and understanding them is essential for maximising your returns.

This guide covers everything you need to know for the 2025/26 and 2026/27 tax years.

Income Tax on Rental Income

Rental income is taxed as part of your total income. After deducting allowable expenses, your rental profit is added to your other income (employment, self-employment, pensions) and taxed at your marginal rate.

Tax Rates for 2025/26

| Band | Income | Rate | |------|--------|------| | Personal Allowance | Up to £12,570 | 0% | | Basic rate | £12,571 to £50,270 | 20% | | Higher rate | £50,271 to £125,140 | 40% | | Additional rate | Above £125,140 | 45% |

If you have employment income of £40,000 and rental profit of £15,000, your total income is £55,000. The rental income pushes some of your income into the higher rate band, so part of it is taxed at 40%.

Allowable Expenses

You can deduct legitimate expenses from your rental income before calculating tax. The more expenses you claim, the lower your taxable rental profit.

Fully Deductible Expenses

• Letting agent fees and management costs
• Insurance — buildings, contents, landlord liability
• Ground rent and service charges
• Council tax (if you pay it rather than the tenant)
• Utility bills (if you pay them)
• Advertising for tenants
• Legal fees for renewals and evictions (not purchase)
• Accountancy fees for rental accounts
• Stationery, phone calls, and travel to the property for management purposes
• Cleaning and gardening between tenancies
• Safety certificates — gas safety, electrical inspection, EPC

Repairs vs Improvements

This distinction is critical. Repairs are fully deductible. Improvements are not deductible against rental income (but may reduce Capital Gains Tax when you sell).

• Repair: Replacing a broken boiler with a similar one — deductible
• Improvement: Installing a new boiler that is significantly better — capital expenditure
• Repair: Repainting walls — deductible
• Improvement: Adding an extension — capital expenditure

The test is whether you are restoring the property to its previous condition (repair) or enhancing it beyond that (improvement).

Replacement of Domestic Items Relief

You can claim relief for replacing furniture, furnishings, and appliances in a let property. The relief covers the cost of the replacement item (less any proceeds from disposing of the old item), but only for a like-for-like or nearest modern equivalent replacement.

You cannot claim for the initial provision of items — only replacements.

Mortgage Interest: Section 24

This is the single biggest tax change to affect landlords in recent years. Since April 2020, mortgage interest is no longer deductible as an expense. Instead, you receive a tax credit at the basic rate (20%) of your mortgage interest costs.

How It Works

1. Calculate your rental profit without deducting mortgage interest
2. Pay tax on the full profit at your marginal rate
3. Receive a 20% tax credit on the mortgage interest

The Impact on Higher Rate Taxpayers

If you are a higher rate taxpayer, this is painful:

• Before Section 24: Mortgage interest deducted at 40% effective rate
• After Section 24: Tax credit at 20% only

For a landlord with £20,000 rental income and £10,000 mortgage interest:

Before Section 24 (40% taxpayer):

• Taxable profit: £10,000
• Tax at 40%: £4,000

After Section 24 (40% taxpayer):

• Taxable profit: £20,000
• Tax at 40%: £8,000
• Tax credit (20% of £10,000): -£2,000
• Net tax: £6,000

That is £2,000 more tax per year. For landlords with multiple properties and large mortgages, the impact is even more significant.

The Income Threshold Problem

Section 24 also pushes landlords into higher tax bands because the full rental income (before mortgage interest) counts towards your total income. This can:

• Push you from basic to higher rate
• Push your income above £100,000, triggering the loss of Personal Allowance
• Affect eligibility for child benefit (High Income Child Benefit Charge)

Capital Gains Tax on Property Sales

When you sell a rental property for more than you paid for it, you owe Capital Gains Tax on the gain.

CGT Rates on Residential Property (2025/26)

• Basic rate taxpayers: 18%
• Higher rate taxpayers: 24%

Calculating the Gain

• Sale price minus purchase price
• Minus purchase costs (Stamp Duty, solicitor fees, survey)
• Minus improvement costs (extensions, conversions — not repairs)
• Minus selling costs (estate agent fees, solicitor fees)
• Minus the Annual Exempt Amount (£3,000 for 2025/26)

Reporting and Payment

Capital gains on UK residential property must be reported to HMRC within 60 days of completion and any CGT paid within the same period. This is a common trap — many landlords assume they can wait until their Self Assessment.

Stamp Duty Land Tax

When purchasing a buy-to-let property, you pay the standard SDLT rates plus an additional 5% surcharge (increased from 3% from October 2024).

SDLT Rates for Additional Properties (2025/26)

| Band | Rate (including surcharge) | |------|---------------------------| | Up to £250,000 | 5% | | £250,001 to £925,000 | 10% | | £925,001 to £1.5m | 15% | | Above £1.5m | 17% |

On a £300,000 buy-to-let purchase:

• First £250,000 at 5%: £12,500
• Next £50,000 at 10%: £5,000
• Total SDLT: £17,500

National Insurance for Landlords

Most landlords do not pay National Insurance on rental income. NI is only payable if HMRC considers your property activities to be a trade rather than an investment. This typically applies to property developers, not buy-to-let landlords.

However, if you provide significant additional services (hotel-style accommodation, regular cleaning, meal provision), your rental income may be treated as trading income subject to NI.

The Property Allowance

If your total property income is under £1,000, you do not need to report it to HMRC. This is the property allowance.

If your income exceeds £1,000, you can choose to:

• Deduct the £1,000 allowance instead of actual expenses (useful if your expenses are minimal)
• Deduct actual expenses as normal

You cannot use both — it is one or the other.

Record Keeping

Landlords must keep records of:

• All rental income received
• All expenses paid, with receipts
• Mortgage interest statements
• Property purchase and sale documentation
• Improvement costs (for CGT purposes)

Records should be kept for at least six years after the end of the tax year.

Structuring Your Property Portfolio

Personal vs Company Ownership

Some landlords are moving properties into limited companies to avoid Section 24 (companies can still deduct mortgage interest in full). However, this involves:

• Stamp Duty on the transfer
• Potential CGT on the transfer
• Corporation Tax at 25% (versus personal income tax rates)
• Different rules for extracting profits

The right structure depends on your circumstances, income level, and long-term plans. Take professional advice before making changes.

How Accounted Helps Landlords

Accounted is designed for self-employed people, including landlords:

• Rental income tracking — record and categorise all rental income
• Expense management — capture receipts for repairs, insurance, and other costs
• Section 24 calculation — correctly calculate your mortgage interest tax credit
• Tax forecasting — see your estimated tax bill throughout the year
• Self Assessment preparation — all your property data ready to file

Explore our pricing plans for landlord features.

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