The Complete Guide to Landlord Tax in the UK

Whether you let out a single flat or manage a growing portfolio, rental income comes with its own set of tax rules — separate from a standard Self Assessment return and, in several places, changed quite recently. This guide pulls the key areas together: what needs declaring, what you can and can't claim, how mortgage interest relief actually works now, what happened to furnished holiday lets, and what to expect if you sell. For a broader look at accountant costs and choosing a professional, see our complete tax accountant guide — or jump straight to landlord accounting support or register your enquiry whenever you're ready.

Do You Need to Declare Rental Income?

In most cases, yes — rental income generally needs reporting to HMRC, usually through Self Assessment. Exactly how depends on how much you receive and whether letting property is something you already do alongside other income.

The property income allowance

There's a property income allowance, currently £1,000 a year, that can cover very small amounts of rental income without the need to report it at all. It's easy to misread this as meaning your rental profit needs to be under £1,000 before you have to declare anything — it doesn't. If your gross rental income (before expenses) is above the allowance, you generally need to report it, even if your actual profit after expenses is small.

If you've never let property before, or you're not sure whether your situation crosses these thresholds, that's exactly the kind of question worth raising with a Self Assessment specialist or a professional who focuses specifically on landlord accounting.

Allowable Expenses Landlords Can (and Can't) Claim

Getting expenses right matters more than most other parts of a landlord's tax return, since it directly affects how much profit you're taxed on. The general principle is that costs must be incurred wholly for the purpose of letting the property, and be genuinely revenue in nature rather than a capital improvement.

Replacing furnishings and domestic items

If you let a furnished property, there's specific relief for replacing items like furniture, appliances and carpets — broadly, the cost of a like-for-like replacement can usually be claimed, though the very first purchase of an item generally can't. This is a common area of confusion, and one worth double-checking with a professional rather than guessing, since the rules changed a number of years ago and older articles sometimes describe an outdated version.

Mortgage Interest Relief: How It Changed

Mortgage interest relief for individual landlords used to work like any other expense — deducted from rental income before working out the tax due. That changed through a phased reform (sometimes referred to as “Section 24”) between 2017 and 2020, and the difference still catches people out, particularly higher-rate taxpayers.

In practice, this means individual landlords can no longer deduct mortgage interest from rental income directly. Instead, they get a tax reducer worth 20% of the interest — which is worse for higher and additional-rate taxpayers than getting relief at their full rate, and can even push some landlords into a higher tax bracket on paper because the full rental income is counted before the reducer is applied. This single change is one of the most common reasons landlords look into whether holding property through a company might suit them better instead, since companies aren't affected by this restriction in the same way — covered in more detail further down this guide.

Furnished Holiday Lets: What's Changed

Furnished holiday lettings (FHL) used to sit in their own, more favourable tax category — different capital allowances, access to certain Capital Gains Tax reliefs, and profits counting as relevant earnings for pension purposes. That separate FHL regime was abolished from April 2025, meaning furnished holiday let income is now generally treated the same as any other residential letting for tax purposes.

• Mortgage interest relief on furnished holiday lets is now restricted in the same way as other residential lets (see the table above), rather than being fully deductible as before.
• The Capital Gains Tax reliefs that used to be available on a sale, such as rollover relief and Business Asset Disposal Relief, generally no longer apply to these properties in the same way.
• Profits from furnished holiday lets are generally no longer treated as relevant earnings for pension contribution purposes.
• Capital allowances on furnishings and equipment are treated differently going forward, moving closer to the replacement-of-domestic-items treatment used for other lets.

If you've owned a furnished holiday let for a while and haven't reviewed your position since this change, it's genuinely worth getting a professional to look again — the numbers behind a decision made a few years ago may no longer hold up the same way today.

Selling a Rental Property: Capital Gains Tax and Deadlines

Selling a rental or second property is one of the most common triggers for Capital Gains Tax, and it's also where timing catches people out — the reporting deadline is far tighter than most people expect from dealing with a normal Self Assessment return.

The 60-day reporting rule

UK residential property gains generally need to be reported to HMRC, and any tax paid, within 60 days of completion — not by the following 31 January. This applies whether or not you also file a regular Self Assessment return, and missing it can mean penalties and interest even if you go on to report the same gain correctly on your annual return later.

Working out the gain

Broadly, the gain is the sale price less the original purchase price, certain buying and selling costs, and money spent on genuine capital improvements (not routine repairs). There's usually a tax-free annual exempt amount available before Capital Gains Tax applies at all, though this has been reduced significantly in recent years and can change again — always confirm the current figure rather than relying on an older article, including this one.

Should You Hold Property Personally or Through a Company?

This is one of the most common questions larger landlords ask, particularly since mortgage interest relief changed. There's no universally right answer — it depends on your borrowing, your portfolio size, and your longer-term plans.

Transferring existing properties into a company is rarely as simple as it first sounds, since it's typically treated as a sale for tax purposes — potentially triggering both Capital Gains Tax and Stamp Duty Land Tax even though no cash actually changes hands with a third party. This is squarely the kind of decision worth modelling properly with a professional before acting on it, rather than after.

Making Tax Digital for Income Tax: What It Means for Landlords

Making Tax Digital (MTD) for Income Tax is being phased in for self-employed people and landlords, based on gross income from these sources, and it changes how records are kept and reported rather than how much tax is owed.

Once it applies to you, MTD for Income Tax generally means keeping digital records and sending quarterly updates to HMRC using compatible software, followed by a final year-end declaration, rather than a single annual return typed in by hand. These thresholds and dates have been adjusted before and could be again, so it's worth checking your current position with a professional rather than assuming an older figure still applies — particularly if your rental income is close to one of these bands.

Non-Resident and Overseas Landlords

If you live outside the UK but let a UK property, you're generally still liable to UK tax on that rental income, and there's a separate set of administrative rules to be aware of.

• Under the Non-Resident Landlord Scheme, letting agents or tenants may need to deduct basic rate tax from rent before paying it to you, unless you've applied to HMRC for approval to receive rent gross.
• Even where rent is received gross, you generally still need to report the income to HMRC yourself, usually via Self Assessment.
• Being non-resident doesn't remove reporting obligations if you sell a UK residential property — the same reporting deadlines described above still apply.
• If your circumstances involve tax residency in more than one country, a professional can help you understand how any double taxation agreement affects your position.

Common Landlord Tax Mistakes We See

• Assuming the £1,000 property allowance means small profits don't need declaring, when it's actually based on gross rental income, not profit.
• Missing the 60-day Capital Gains Tax reporting deadline after a sale because it's assumed to align with the usual 31 January Self Assessment deadline.
• Claiming mortgage capital repayments as a deductible expense, rather than only the interest portion (and even then, only as a tax reducer).
• Not keeping clear records for jointly owned property, particularly when ownership shares aren't a simple 50/50 split.
• Assuming a furnished holiday let still qualifies for the older, separate tax treatment after the rules changed.

Find Landlord Tax Help by Location

Landlord and rental income enquiries come up right across the areas we cover — a few places where this is a particularly common type of enquiry:

• Southgate — landlords balancing employment income with one or more rental properties
• Bush Hill Park — converted flats and period properties let out alongside a main job
• Cockfosters — larger family homes and second properties, often alongside dividend or investment income
• Enfield — a broad mix of landlord enquiries across North London
• London — from a single second property through to larger portfolios

Wherever you're based, tell us your postcode or town when you register an enquiry — see our full list of locations for more.

If you'd rather start from a general overview of costs, deadlines and choosing the right professional before focusing specifically on property, our complete tax accountant guide covers that ground.

Frequently Asked Questions

A few more common questions from landlords — see our full FAQ page for more, or get in touch directly if yours isn't covered here.