Navigating UK tax on rental income for residents in 2025 can be challenging, especially with changing tax rates, National Insurance rules, and filing deadlines. Whether you’re an experienced property investor or letting a property for the first time, understanding how rental income is taxed in the UK is essential to staying compliant and avoiding costly mistakes. In this complete guide, we explain everything you need to know about UK tax on rental income for residents — from how your taxes are calculated to practical tips for reducing your liability.
Who Should Read This?
This article is relevant for UK tax resident individuals receiving rental income from properties in the UK or abroad.
Details on letting a UK property while non-resident and letting a room in the house you live in can be found in our other articles.
If you are unsure about your UK tax residence status, please contact us via Contact Expat Tax Solutions UK to discuss your UK tax residence position.
What Counts as Rental Income for UK Tax Purposes
Understanding what qualifies as rental income is key to managing your UK tax on rental income effectively.
Rental income is any income earned through the letting of a property. This includes the rents paid by tenants and also any payments the tenants make to you for things such as the use of furniture, utilities, cleaning and ground rent etc. If the tenants contract and pay directly for their own utilities, this is not rental income and does not need to be considered further.
The tenants may have also paid an initial deposit when starting the tenancy. This is not rental income and is not subject to tax.
As a UK tax resident, you are taxable on your worldwide income and gains and therefore subject to UK tax on rental income, even for overseas properties.
Allowable Expenses to Reduce UK Tax on Rental Income for Residents
Claiming allowable expenses is one of the easiest ways to reduce UK tax on rental income and maximise your profits.
UK income tax is due on the profits generated from the rental business. This is calculated as total gross income less any allowable expenses related to running the rental business.
When determining the amount of rental business expenses to deduct, you have two options:
- Deduct the actual costs of the rental business expenses incurred; or
- Deduct the Property Allowance of £1,000.
You are able to choose the most beneficial of the two options above for each tax year you let a property however you cannot deduct the Property Allowance and your actual expenses. Therefore, if your rental business expenses are less than £1,000, it will be beneficial to claim the Property Allowance as a deduction against your rental income.
Separate rules apply if you let a room or annex in the property that you live in so please read our separate article if this applies to you.
Should you elect to deduct actual expenses, common examples of rental business expenses that are allowable for UK tax purposes are:
- General maintenance and repairs to the property
- Water rates, council tax, gas and electricity if paid by you
- Landlord, building and contents insurance
- Letting agent fees and management fees
- Rents (if you’re sub-letting), ground rents and service charges
- Vehicle mileage deductions for business related motoring costs
Mortgage Interest Tax Relief on Rental Income
Interest payments for financing costs related to the property (mortgages etc.) are eligible for UK tax relief (provided you have not claimed the Property Allowance) however special rules apply.
Firstly, only the interest element of mortgage payments is eligible for tax relief. The portion of payments that reduce the capital balance of the loan are not deductible and should be removed when assessing the amount of mortgage payments eligible for relief.
Once the mortgage interest amount has been calculated, relief is not given by deducting this against your rental profit. Instead, the mortgage interest amount is multiplied by 20% and deducted from the UK tax due on your rental income. For Basic Rate (20%) taxpayers, there is no difference to the tax outcome however for Higher Rate (40%) or Additional Rate (45%) taxpayers, tax relief on mortgage interest is essentially restricted to 20% rather than your marginal tax rate of 40% or 45%.
The mortgage interest tax reducer cannot generate a tax refund and any unused amounts are carried forward to future years.
How Jointly Owned Properties Affect UK Tax on Rental Income
When a property is jointly owned, the UK tax on rental income is calculated on each owner’s share of the property.
Where the property is jointly owned by you and your spouse, the income and expenses are split 50/50 irrespective of the legal ownership split. If you have a unequal legal ownership split, you can elect to be taxed based on that split however you must declare this to HMRC via Form 17.
Where the property is jointly owned by you and someone other than your spouse, the income and expenses are split based on the legal ownership of the property.
UK Tax on Overseas Rental Income for Residents
As a UK tax resident, you are taxable on your worldwide income and gains and your overseas rental income is therefore still taxable under the rules governing UK tax on rental income for residents. The income/expenses from your UK properties and your overseas properties must be assessed separately and cannot be combined.
You may also be subject to foreign tax on your overseas rental income. If this is the case, you should be able to claim Double Taxation Relief to reduce your UK tax liability on your UK self-assessment tax return.
How UK Tax on Rental Income for Residents Is Calculated In 2025
The UK tax on rental income for residents depends on your total taxable income and applicable tax bands. The UK tax on rental income is calculated using the ‘non-savings’ rates which are the same rates as those applied to employment income. The 2025/26 rates are:
| Band | Taxable income | Tax 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 | over £125,140 | 45% |
The above thresholds apply to your total taxable income and therefore, if you also have other sources of UK taxable income (self-employment income, bank interest, dividends etc.) or are also employed, your rental income is taxed at the highest rate that the income falls into.
For example, if you earn a salary of £30,000 and rental profit of £5,000, the £5,000 rental profit sits wholly in the basic rate band and the tax due on that income is £1,000 (£5,000 x 20%).
*If your UK taxable income exceeds £100,000, you will start to lose entitlement to the personal allowance. The rates shown are for English and Welsh taxpayers. Individuals living in Scotland are subject to different rates of tax.
Do I Pay National Insurance on Rental Income in 2025?
No. Rental income is not currently subject to National Insurance.
Student Loan Repayments on Rental Income for UK Residents
Student Loan repayments are calculated based on your UK taxable income and plan type. UK taxable income in excess of the repayment threshold for your plan is subject to Student Loan repayments at the rate specified in your plan (9% for an Undergraduate Degree or 6% for Postgraduate Student Loans).
Rental income is classed as ‘unearned income’ and is only considered for Student Loan repayments if your total ‘unearned income’ for the year exceeds £2,000.
Therefore, if your rental profit exceeds £2,000 and your total taxable income exceeds the repayment threshold, your rental profit will be subject to Student Loan repayments via your self-assessment tax return.
VAT Rules for UK Tax on Rental Income for Residents
Rental income is not subject to VAT and you therefore do not need to register for VAT.
Record Keeping For UK Tax on Rental Income for Residents
You must keep records of your rental income and expenses for UK tax purposes. You do not need to submit the records to HMRC however they must be retained to calculate the UK tax on your rental income. In the event of a HMRC enquiry, HMRC will request copies of these records to validate your rental income and justify any UK tax fee deductions that have been claimed.
You must keep your records for 5 years after 31 January following the end of the tax year. I.e. for the 2025/26 UK tax year, records must be kept until 31 January 2032.
UK Tax on Rental Income for Residents: Deadlines and Filing Rules
Missing your filing deadlines can lead to penalties and higher UK tax on rental income costs.
If your rental income is more than £1,000 and you made a profit in the tax year, you are required to declare this to HMRC via a self-assessment tax return. You must first register for self-assessment via Check how to register for Self Assessment – GOV.UK.
The deadline to register for self-assessment is 5 October following the end of the tax year. i.e. for 2025/26 UK tax returns, you must register by 5 October 2026.
Once registered, HMRC will issue you with a Unique Taxpayer Reference (UTR) which is a 10 digit identification number necessary to file your tax return.
The deadline to file your tax return and pay any outstanding liabilities is 31 January following the end of the tax year. i.e. the 2025/26 UK tax return filing and payment deadline is 31 January 2027.
HMRC will levy interest and penalties if your tax return and payments are not made by this date.
For help in determining whether you have a tax return filing obligation and support with preparation and submission of your tax return, please contact us to schedule a free no obligation consultation via: Contact Expat Tax Solutions UK
UK Tax on Rental Income for Residents FAQs
Do I have to pay UK tax on rental income for residents?
UK tax on rental income for residents is payable unless your total rental income for the tax year is less than £1,000, in which case you do not need to declare or pay tax on it due to the Property Allowance.
How much UK tax on rental income do I pay?
UK tax on rental income for residents is calculated at your marginal tax rate. Therefore 20%, 40% and 45% rates will apply depending on your total UK taxable income during the year.
How do I declare and pay UK tax on rental income for residents?
Rental income is declared through a self-assessment tax return. The deadline to file your return and pay the relevant tax is 31 January following the end of the tax year. I.e. the deadline for the 2025/26 tax year is 31 January 2027.
What are the penalties if I don't declare UK tax on rental income for residents?
If a tax return is filed late, a £100 late filing penalty applies. Penalties are levied while the return remains outstanding with up to £1,600 of penalties applying to tax returns that are one year late. In addition, late payment penalties and interest apply relating to unpaid tax. HMRC may also levy further penalties if they believe tax returns were deliberately not filed.
Do I pay UK tax on rental income if I live abroad?
Yes. UK rental income is UK sourced and therefore taxable in the UK irrespective of your residence status. Read our guide relating to UK tax on rental income for non-residents for more information.
Get Expert Help With UK Tax on Rental Income for Residents
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