All You Need to Know About Tax For Landlords

All You Need to Know About Tax For Landlords


As letting out a property to private tenants is considered a means of generating income, UK law dictates that all such income must be taxed at the appropriate rate. But as is the case with all aspects of UK taxation, the system as a whole is rather complex and convoluted to say the least, though it must be comprehensively understood and worked in accordance with at all times.

In terms of the way in which rental property income is taxed, there are certain instances where the rules are rather different which include:

  • Letting out a room in a property that is your primary residence
  • Letting out a property as a holiday home
  • Letting out properties in foreign nationals
  • Letting out your primary property during periods of absence

For further information on these specific types of property lets and the taxation thereof, consult the official HMRC guidelines at:

How Tax Is Calculated

Exactly how much tax you are expected to pay will be calculated in accordance with the income that you make on the property. Or in other words, the amount of money you are left with when you have collected your rental income and deducted permitted expenses and allowances, this is the taxable amount.

Your Income

It’s important to understand that total income incorporates not only the rent payable, but also any additional monies paid by the tenants for additional services of any kind. If, for example, an additional charge is payable for the use of provided appliances or for gardening duties to be periodically performed, these will also be considered part of your total rental income.

Tax Rates

In terms of exactly how much tax you can expect to pay, rental income tax follows the exact same rules and rate boundaries as standard income tax. This means that you will be liable to pay 20%, 40% or 45% on the income you receive over and above the relevant tax band threshold. As such, exactly how much you charge your tenants in conjunction with how many properties you are currently letting out will determine the applicable rate of taxation.

For more information on general income tax rates and personal allowances, refer to the most current HMRC guidelines at:

Alternatively, there are a number of tax consultancy services, like FCTC who offer a range of tax advice and can advise on tax rates for landlords.

Paying Rental Income Tax

The standard tax year in the United Kingdom begins on the 6th of April and ends on the 5th of April the following year. It is your responsibility to fully and accurately declare all income received by way of your property lets before the end of the tax year, incorporating any allowable deductions and expenses to be taken away from the total income amount.

Trading Income Exceptions

When a landlord also offers additional payable services not considered standard with property rentals, all such income will usually fall under trade income and the applicable taxation guidelines. If for example you offer housekeeping services, laundry services or the provision of meals, this is classified as trading income.

For the latest information and any applicable updates to UK taxation of rental property income, refer to the government’s own website

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