Landlord tax, done properly

Landlords are taxed on rental profit, not rent received — but mortgage interest is not deducted from it. It is relieved instead as a 20% tax reducer, which is why higher-rate landlords who break even in cash still owe tax. Gains on UK residential property must also be reported and paid within 60 days of completion.

Rental income has its own rules, and most of them changed within the last few years. Mortgage interest no longer works the way landlords expect, filing is going quarterly, and HMRC now receives data from deposit schemes, councils and letting agents.

The change most landlords still get wrong

Mortgage interest used to come off rental income before tax was calculated. It does not any more. Instead you receive a tax reduction worth 20% of the interest.

For a basic-rate taxpayer the result is broadly similar. For anyone paying higher rate — including people pushed into higher rate by the rental income, since the full rent now counts towards your total income — it is materially worse. Landlords who were comfortable five years ago and cannot understand where the money went are usually looking at this rule without knowing its name.

What you can and cannot deduct

Allowable: letting agent and management fees, repairs and maintenance that restore rather than improve, landlord insurance, ground rent and service charges, council tax and utilities where you pay them, safety certificates, accountancy fees, and the cost of travelling to the property for genuine business reasons.

Not allowable as a deduction: mortgage capital repayments, mortgage interest (see above — it is relieved differently), and improvements. Improvements are not lost, though: they usually reduce the capital gain when you sell, which is why keeping those invoices for a decade is worth the drawer space.

Where your gross rental income is very small, the £1,000 property allowance may be simpler than itemising. Where you let a room in your own home, the rent-a-room scheme allows up to £7,500 tax-free.

Landlords living abroad

The non-resident landlord scheme catches more people than expect it: you do not have to think of yourself as an expat to be within it. Move abroad for work with a flat still let in the UK, and the scheme applies.

Without approval, your agent — or the tenant directly, where there is no agent — withholds 20% of the rent and pays it to HMRC. With approval under form NRL1, the rent comes to you in full and the tax is settled through Self Assessment, where your expenses and allowances are actually taken into account.

Approval is not automatic and it is not retrospective in effect: until it is in place, the withholding continues. This is a form worth filing before you leave, not after the first deduction arrives.

Not sure where you stand?

One property or twelve, resident or abroad, declared or not — tell us the situation and we will tell you what needs doing and what it costs. Free assessment, fixed quote in writing, and complete confidentiality about anything you disclose.

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Free assessment first. If there is work to do, you get a fixed quote in writing before anything starts.

If the rent was never declared

This is more common than the tax profession likes to admit, and it is usually not the story people assume. An inherited flat let out informally. A property kept when someone moved in with a partner. A few years abroad with a tenant paying into an old account.

HMRC now receives data from tenancy deposit schemes, local authorities and letting agents, and matches it against returns. The nudge letters go out on the strength of that matching, which is why they are so rarely wrong about the existence of a property.

The Let Property Campaign is the route back. It lets you disclose on materially better terms than an HMRC-initiated assessment, and the size of the penalty turns substantially on whether the disclosure was unprompted. If a letter has not yet arrived, you are in the best position you will ever be in — and that position expires the moment one does.

Selling: the 60-day trap

Sell a UK residential property at a gain and the tax is reported and paid within 60 days of completion, on a separate return. Not in January. Not with your Self Assessment. Within 60 days.

The annual exempt amount is £3,000, and what counts as the gain is not simply sale price minus purchase price — buying and selling costs, improvements and any period the property was your main home all affect it. Tell us before you complete rather than after, because several of the useful decisions cannot be made retrospectively.

Quarterly filing is coming

Making Tax Digital for Income Tax replaces the single annual return with digital record-keeping and quarterly updates. It phases in by qualifying income: £50,000 from 6 April 2026, £30,000 from 6 April 2027, £20,000 from 6 April 2028 — see MTD for landlords for what changes.

For landlords keeping records in a notebook, this is the substantive change — not the tax, the bookkeeping. Clients on a monthly or quarterly service are already compliant by construction, because the records exist as they go rather than being assembled once a year.

What we do for landlords

Landlord Self Assessment, with finance costs relieved correctly
Non-resident landlord scheme applications (NRL1) and non-resident returns
60 days capital gains returns on residential property disposals
Let Property Campaign disclosures for undeclared rent
Quarterly digital filing and the bookkeeping behind it
Portfolio structuring questions — including the honest answer about companies, which is that they suit fewer landlords than the internet suggests

Questions people ask

Do I pay tax on rental income if I make no profit?

You are taxed on rental profit, not rent received — but "profit" for tax is not what lands in your account. Mortgage interest is not deducted from rental income; it is relieved as a 20% tax reducer instead. That is why landlords who are genuinely breaking even in cash terms can still owe tax, and why the shock usually arrives in year one.

What is the non-resident landlord scheme?

If you live abroad and let out UK property, your letting agent — or the tenant, where there is no agent — must withhold 20% of the rent and pay it to HMRC. Approval under the scheme, applied for on form NRL1, lets you receive the rent in full and settle the tax through Self Assessment instead.

I have never declared rental income. What happens now?

The Let Property Campaign exists for exactly this and the terms are far better than waiting. Penalties depend heavily on whether you came forward or were prompted — and how many years are on the table depends on whether HMRC treats it as careless (6 years) or deliberate (20 years). Voluntary disclosure influences both of those judgements in your favour.

Does the rent-a-room scheme apply to me?

It applies where you let furnished accommodation in your own home: up to £7,500 a year tax-free. It does not apply to a separate property, and it is not automatic in every case — where your receipts exceed the limit there is a choice to make about how you are taxed.

When do I need to start filing quarterly?

Making Tax Digital for Income Tax phases in by qualifying income: £50,000 from 6 April 2026, £30,000 from 6 April 2027, £20,000 from 6 April 2028. It means digital records and quarterly updates rather than one annual return, and each threshold is measured two years earlier — see MTD for landlords.

I sold a rental property. How long do I have?

Where there is capital gains tax to pay on a UK residential property, it must be reported and paid within 60 days of completion — a separate return, not part of your annual Self Assessment. It is one of the most commonly missed deadlines in UK tax.

Figures are for the tax year shown and change every April. They are general information, not advice — we check the current position for your circumstances before anything is filed.

Reviewed 19 October 2026.