Property Rental Taxation:  A guide for UK landlords

Using your surplus personal or business income to invest in property in the UK has been hugely popular over several decades. As accountants, we often advise our clients to look at long-term investments that are tax-efficient but can compound their growth in a tax-efficient manner. One popular vehicle to do this is through property.

The fact is that the tax system is not as advantageous towards landlords, particularly those that are into the high tax bands as it once was. However, property can still be an attractive investment and this guide will help you feel more confident in terms of the implications of becoming a landlord in the UK.

Tax Low For Rental Property Owners

One of the most common questions we get asked as accountants for landlords and property owners, is how can I reduce my tax bill?

If you are a basic rate taxpayer then essentially you are only going to pay 20% tax on the profit you make from your second or additional properties. In this situation the tax burden on landlords is manageable.

The Challenge is when a landlord is a higher-rate taxpayer.

What Taxes Do Landlords Pay

Landlords pay tax on any profit they make from their rental property business. Although it may not seem like a traditional business is taxed similar to self-employed people.

This means you pay UK income tax at the relevant rate for your personal situation. So if you are a basic rate taxpayer this is typically around 20% in any given tax year and if you are a higher rate taxpayer this is typically around 40%.

The good news is you do not need to pay national insurance on your property income which makes it advantageous compared to self-employed income.

How is Tax Calculated on Rental Property

Rental property income is taxed in the same way as other income sources. In other words, you have your tax-free income allowance which is currently £12,570 in the UK and anything you earn above this is taxed at the relevant tax rate. So at the time of writing this article, this is 20% for basic rate taxpayers and 40% for higher rate taxpayers.

You need to be aware of hidden tax charges, for example, if you earn over £100,000 in the UK you start to lose your personal tax allowance.

Tax-Free Rental Income in the UK

You can rent a room from your main residence and receive up to £7500 completely tax-free. However, your normal rental income is a UK landlord is subject to income tax. If your total income is less than the tax-free allowance then there will be no tax payable.

How to Pay Tax Property for Non-Residents

If you are a non-UK tax resident then your tax situation is a lot more complicated ad it is usually advisable to get specialist advice. Whether you pay tax or not in the UK depends on whether you are deemed to be a tax resident in the UK for tax purposes, even if you do not feel it’s your main country of residence. If you are subject to pay UK income tax on your property income you will need to submit a UK tax return during the normal timescale which is the 31st of January following the 5th of April.

When to Pay Tax On Rental Property

Following the 5th of April in any given tax year you must pay your tax and your tax return by the following January. For example, if your tax year ended on the 5th of April 2025 then it must be submitted and paid by 31st of January 2026.

Please note that the making tax digital (MTD) changes are coming in from April 2026 and these will also affect landlords with revenue (before expenses) of £50,000 or more which is reduced to £30,000 or more from April 2027.

Declaration of Property Taxes

At Gro Profit First Accountants we have assisted many taxpayers with a property tax disclosure. This is where for whatever reason they did not submit their tax return on time or inform HMRC. In this situation, you must follow the tax disclosure process properly to inform HMRC of your tax situation.