Tax on rental income – a landlord’s 6-step guide

Landlord Self Assessment tax return – six key steps

1. Register for Self Assessment
2. Stay on top of landlord tax deadlines
3. Gather the right information
4. Work out allowable expenses for rental income
5. Fill in the landlord tax return
6. Pay your landlord tax

What landlord tax do I need to pay?

While you might not think that landlords count as being self-employed, as you’re receiving income that doesn’t get taxed at source (through PAYE), you need to fill in and submit a Self Assessment tax return to HMRC.

There are a few different types of landlord tax to keep in mind:

• tax on rental income (income tax for rental income)
• National Insurance contributions (NICs)
• stamp duty land tax
• capital gains tax

Not all of these are paid through Self Assessment. For example you only need to pay stamp duty land tax and capital gains tax when buying or selling a property.

Income tax and NICs are paid annually and are based on the income you make from renting out your properties. To pay your income tax and NICs you need to register for Self Assessment and complete a tax return for rental income each year.

You can use HMRC’s tool to check if you need to send a Self Assessment tax return. And check out our Self Assessment and tax resources.

How much tax do you pay on rental income?

Rental income is taxed at the same rates as other forms of employment:

• zero per cent up to £12,570
• 20 per cent between £12,571 and £50,270
• 40 per cent between £50,271 and £150,000
• 45 per cent above £150,000

It’s important to remember it gets added to any other income you make, which could push you into a higher tax bracket. For example if you make £15,000 a year from rental income plus £45,000 from a self-employed job, you’ll be taxed on your overall income of £60,000. This means you’d pay:

• zero per cent on the first £12,570
• 20 per cent on the next £37,700
• 40 per cent on the final £9,730

Read our guide on income tax rates for more information.

What is the rental income tax allowance?

You get a £1,000 tax-free rental income tax allowance each year, which you can claim on your tax return.

However, a landlord’s rental income will almost certainly be more than £1,000 a year, and you can’t claim any other expenses if you use the property allowance. This means the allowance is only useful if you have less than £1,000 in expenses from renting out your property.

If your property income is between £1,000 and £2,500 a year, you need to contact HMRC.

You report rental income on a Self Assessment if it’s:

• £2,500 to £9,999 after allowable expenses
• £10,000 or more before allowable expenses

Do landlords pay National Insurance on rental income?

You pay Class 2 National Insurance if your profits are £6,725 a year or more and renting out properties is your main job. Essentially, you only pay National Insurance if you’re running the operation as a business.

As a way of working out whether renting out your property counts as running a business, HMRC says all of the following should apply:

• being a landlord is your main job
• you rent out more than one property
• you’re buying new properties to rent out

If you’re not renting out property as a business, you don’t pay National Insurance – even if you manage your property yourself.

What about corporation tax for landlords?

Some landlords choose to create a limited company for the purposes of letting a property. That’s because profits are subject to corporation tax at 19 per cent or 25 per cent (depending how much profit you make), rather than higher individual income tax rates – although there are more costs and paperwork involved with running a limited company.

If you’re using the corporate structure, the process is slightly different and you'll need to set up for corporation tax.

You'll then follow the process for paying corporation tax. Read more about this in our guide to filing a company tax return.

How does the landlord tax return process work?

The Self Assessment process is largely the same whether you’re a landlord, small business owner, or sole trader.

1. Register for Self Assessment

The first thing you need to do is register for Self Assessment for landlords.

If you aren’t already registered for Self Assessment, you usually need to register by 5 October in the tax year after you started receiving rental income. So, if you start receiving rental income in 2023-24, you’ll need to register by 5 October 2024.

HMRC might fine you if you don’t register by the deadline, so be sure to do it as soon as possible.

When you register, you should get a Government Gateway user ID and password. With this you can set up your personal tax account, which lets you manage your taxes online.

Once you’re registered, you can then file your tax return by filling out the Self Assessment tax return form either online or on paper.

That being said, Making Tax Digital means that paper tax returns will eventually be phased out. This is due to come in for landlords in April 2026 if you make over £50,000 a year – but you're able to sign up now if you like.

2. Stay on top of landlord tax deadlines

The deadline for submitting your tax return for each financial year is usually 31 October for paper tax returns and 31 January for online tax returns. So for the 2022-23 tax year, the deadline for paper tax returns was 31 October 2023 and the deadline for online tax returns is 31 January 2024.

Once you’ve filed your tax return, you then need to pay the tax you owe. The deadline is the same as the final date for online Self Assessment tax returns, so the deadline for paying your 2022-23 tax is 31 January 2024.

There are penalties for missing the deadlines, so don’t delay getting yours ready.

3. Gather the right information

To fill in your tax return you’ll need information about all the income you’ve received throughout the tax year, as well as information about expenses you want to deduct.

It’s important to keep a record of all your income and expenses so that you can easily find it when you come to fill in your return.

HMRC says you need to record:

• the dates you let out your property
• all the money you’ve spent (including cash, cheque, credit and debit card transactions)
• all rents received

HMRC lists the documents to keep in support of your records:

• lease or letting contracts
• rent books
• receipts
• invoices
• bank statements
• mileage logs (for journeys that are solely for your property business purposes)
• cost of the vehicle used for property business and its CO2 emissions
• for furnished holiday lettings and commercial premises, the costs of any other capital items used in the property
• all documents relating to when you bought the property

You can use software to keep much of this information – for example, there’s accounting software available that can organise and keep track of your records for you.

You’ll also need your UTR (unique taxpayer reference) number, which is assigned to you when you register for Self Assessment. It’s usually printed on communications from HMRC regarding your tax return, but keep a note of it somewhere safe so you can find it easily.

4. Work out allowable expenses for rental income

There are a number of allowable expenses for landlords. You can deduct these to work out your total taxable profit. As a general rule, your expenses need to be ‘wholly and exclusively’ used for the purposes of renting out property.

Some of the main allowable expenses are:

• property repair and maintenance costs (but not improvements)
• replacement of domestic items (from April 2016)
• accounting and letting agents’ fees
• landlord insurance
• running costs

There’ve been a number of changes to the way you can deduct mortgage expenses from your rental income. You can no longer claim tax relief on mortgage interest repayments (after being reduced to 20 per cent in 2019-20).

It’s replaced by a 20 per cent tax credit on your mortgage interest repayments. Read about buy-to-let tax changes.

Read more about allowable expenses for landlords on the government website.

We’ve also got more articles about self-employed tax deductible expenses:

• Self-employed tax deductible expenses: what can I claim?
• What expenses can I claim as a limited company?

5. Fill in the landlord tax return

When you fill in your tax return online, HMRC’s system reacts to information as you enter it, removing sections that aren’t relevant.

It’ll ask you what type of income you receive, tailoring the return to your circumstances.

UK landlords will need to fill in the UK property section, where you’ll tell HMRC about:

• rental income and other receipts from UK land or property
• income from letting furnished rooms in your own home
• income from furnished holiday lettings in the UK or European Economic Area
• premiums from leasing UK land

For paper tax returns, everybody needs to fill in form SA100.

Landlords should fill in the UK property supplement SA105 and any other relevant supplements (for example, SA103 if you’re also self-employed).

6. Pay your landlord tax

HMRC will calculate what you owe and send you a tax bill. If you send a paper return, you’ll get a bill in the post.

If you file online, you can see how much you owe under ‘View your calculation’.

You’ll need your payment reference to pay your bill, which is your Unique Taxpayer Reference (UTR) number followed by the letter ‘K’.

The fastest ways to pay your tax bill are:

• online or telephone banking
• Chaps (Clearing House Automated Payment System)
• debit or corporate credit card online (you can’t pay using a personal credit card)
• at your bank or building society

You can also pay by Bacs, cheque, or Direct Debit, but these take longer.

It’s important to pay your bill as soon as you can, because there are penalties for missing the deadline.

If your bill is over £1,000, you’ll also need to make a payment on account, which is an advance payment towards your next Self Assessment bill.

You usually need to make two payments on account each year – one on 31 January and one on 31 July. Read more about payment on account.

And finally, if your bill is less than £30,000 for your payment due on 31 January 2024 and you think you’ll struggle to pay, you can use HMRC’s Time to Pay service to set up a payment plan online. Using Time to Pay, you can clear your bill over the following 12 months.

But if you can pay, you should – the system is designed for those in financial difficulty and interest will be added to the bill from 1 February, making it more expensive.

Non-resident landlord tax return – what do you need to know?

If you live abroad for more than six months a year, you’ll be considered as a ‘non-resident landlord’ by HMRC.

You can choose to receive your rent in full and then pay tax on it, or you can choose to receive your rent with tax already deducted.

If you receive your rent in full, you’ll need to apply to pay tax through Self Assessment by filling out form NRL1i.

When it comes to doing your tax return, you’ll need to complete the ‘property’ section form SA105 as well as the ‘residence’ section form SA109.

It’s important to note that as a non-resident landlord, you won’t be able to use HMRC’s online services to pay your tax return. Instead, you’ll have to send your tax return by post or get help from a professional accountant.

Read more about paying tax as a non-resident landlord on the government website.

Rental tax changes for landlords

The government often announces tax changes for landlords. While we’ve tried to provide an exhaustive list of everything you need to keep in mind for your tax return, exactly what you need to pay will depend on your particular circumstances and how things change in future.

You can read about the buy-to-let tax rules landlords should know about, but it’s worth keeping your eye on our landlord news to follow the latest updates.

Still unsure about landlord tax and Self Assessment for rental income? Ask any questions in the comments.

Useful guides for buy-to-let landlords

• Setting up a property company
• The ultimate guide to building a property portfolio in the UK
• How to work out rental yield and free rental yield calculator
• What’s the difference between buildings and contents insurance?