Allowable expenses, Section 24 mortgage interest, the property allowance, Making Tax Digital for landlords, and common mistakes to avoid.
Tax year 2026/27 edition · Reviewed against live Gov.uk and HMRC sources on 27 April 2026
Reviewer's note. Every material claim in this guide has been verified against the official HMRC manual or Gov.uk publication cited inline. Where the original draft contained inaccuracies, they have been corrected and the corrections noted in the revision log at the end. Tax law changes — always confirm against the live Gov.uk page before relying on any specific figure for a return.
If you receive rental income from property in the UK, HMRC expects you to keep records of every pound coming in and going out of your property business (Gov.uk: Work out your rental income). From 6 April 2026, many landlords must also keep those records digitally under Making Tax Digital for Income Tax (Gov.uk: Use Making Tax Digital for Income Tax). This guide covers what you need to record, which expenses you can deduct, how Section 24 mortgage interest works, and the practical steps to stay compliant for the 2026/27 tax year.
You must report rental income to HMRC if your gross property income exceeds the £1,000 property allowance. Below this threshold, the income is tax-free and does not need to be declared (Gov.uk: Tax-free allowances).
If your gross property income is between £1,000 and £2,500, you should contact HMRC, who will tell you whether to report it through Self Assessment, an adjustment to your PAYE tax code, or a simple assessment (Gov.uk: Renting out your property).
You must report rental income on a Self Assessment return if it is more than:
If you have not previously filed a Self Assessment return, you must register with HMRC by 5 October following the end of the first tax year in which you received rental income (Gov.uk: Register for Self Assessment).
HMRC treats all your UK rental properties as a single property business. Profits and losses from all UK properties are added together. Overseas property income must be kept separate and reported on a different supplementary page.
Rental income is not just the monthly rent. HMRC requires you to include (Gov.uk; HMRC PIM1051):
If you share ownership with someone else, you report only your share. Where joint owners are spouses or civil partners living together, the default is an equal 50:50 split unless a Form 17 election is filed reflecting unequal beneficial ownership (HMRC TSEM9810).
You can deduct expenses from rental income to arrive at your taxable rental profit, provided they are incurred wholly and exclusively for the purposes of your rental business (HMRC PIM2010). If a cost has a personal element, you must apportion it.
Letting agent fees for finding tenants, rent collection, and property management are fully deductible. Typical rates are 8–15% of gross rent for a fully managed service.
Costs of maintaining the property in its current condition are revenue expenses (HMRC PIM2030): redecoration between tenancies, plumbing/electrical/structural repairs, damp treatment, pest control, roof repairs, replacing broken windows (double-glazing a previously single-glazed window is treated as a repair if the improvement is incidental), painting, and boiler servicing.
What is not a repair. Any work that improves the property beyond its original state is capital expenditure. An extension, loft conversion, or adding a new bathroom where there was none before cannot be claimed as revenue — these form part of the property's CGT base cost (HMRC PIM2025).
Buildings insurance, contents insurance, landlord-specific insurance, and rent guarantee insurance are deductible. Personal insurance is not.
Payments to a freeholder for ground rent, and service charges for shared areas, are fully deductible if the landlord is contractually responsible.
Only deductible if the landlord pays them — typically during void periods or where included in rent. If the tenant pays directly, the landlord cannot claim.
Accountancy fees for preparing property accounts and the tax return are allowable. Legal fees are deductible for lets of a year or less, and for renewing a lease under 50 years. Legal fees for buying or selling property are capital costs.
Costs of advertising for tenants — online listings, newspaper adverts, letting agent advertising fees — are fully deductible.
Mileage for visiting rental properties can be claimed at 45p per mile for the first 10,000 miles and 25p per mile thereafter for cars and vans; 24p for motorcycles (Gov.uk: Mileage rates). The simplified expenses route was extended to landlords from 6 April 2017 (HMRC PIM2220). Travel combined with a personal visit cannot be claimed.
Phone calls related to the rental business, stationery and office costs, gardening and cleaning services, EPC costs, safety certificates (gas, electrical, legionella), keys, locks, and security costs.
Our Self Assessment 2025/26 Tracker has income logs, expense categories, quarterly summaries, and a submission-ready pack for landlords filing before January 2027.
View SA 2025/26 Tracker — £4.99Since 6 April 2016, landlords of furnished residential properties can claim relief for replacing domestic items — but not for the initial purchase of furnishings in a previously unfurnished property (HMRC PIM3210).
Qualifying replacements: furniture, furnishings (curtains, blinds, carpets), household appliances, and kitchenware. The relief is limited to the cost of a like-for-like replacement. If you upgrade, claim only the cost of an equivalent basic replacement, plus disposal/installation costs, less any proceeds from selling the old item.
| Band | Income range | Rate |
|---|---|---|
| Personal allowance | First £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The personal allowance reduces by £1 for every £2 above £100,000, fully removed at £125,140. Scottish taxpayers have separate rates. Property profits stack on top of other non-savings income.
Important — change announced for April 2027. From 6 April 2027, property income will have separate rates of 22%, 42% and 47% (HM Treasury technical note, 26 November 2025). The Section 24 finance-cost relief will rise from 20% to 22%. These do not apply to 2026/27 — they take effect for 2027/28 onwards.
The restriction was introduced by Section 24 Finance (No. 2) Act 2015, phased in from 6 April 2017 and fully in place from 6 April 2020 (Gov.uk: Tax relief for residential landlords).
For 2026/27, individual residential landlords cannot deduct mortgage interest from rental income. Instead, the Income Tax liability is reduced by a basic-rate tax reduction equal to 20% of qualifying finance costs (HMRC PIM2054).
Terminology note. Many commentators call this a "20% tax credit", but in HMRC's legislation it is a "basic-rate tax reduction" applied at Step 6 of the Income Tax calculation. The distinction matters: it is not refundable, cannot create or increase a loss, and cannot reduce tax on non-property income below zero.
Qualifying finance costs include mortgage interest (not capital repayments), interest on loans to buy furnishings, and mortgage arrangement and renewal fees.
How it works. Taxable rental profit is calculated as income minus all allowable expenses except finance costs. This figure is added to other income to determine the tax band. Then, the finance-cost tax reduction is applied: 20% of the lower of (1) total finance costs, (2) property business profits, or (3) adjusted total income exceeding the personal allowance.
This means higher-rate taxpayers pay more tax than before 2017. The restriction applies only to individual landlords — limited companies can still deduct mortgage interest in full. Unused finance cost relief carries forward indefinitely.
If gross rental income is £1,000 or less, it is tax-free and need not be reported. Above £1,000, you choose: deduct the £1,000 flat allowance, or claim actual expenses. You cannot do both. The allowance cannot create a loss, cannot be used against Rent a Room income, and each joint owner gets their own £1,000 (Gov.uk).
The FHL regime was abolished from 6 April 2025 (Gov.uk). FHL income is now part of your normal UK property business. The abolition removed: full finance cost deduction (now Section 24), capital allowances on new expenditure (now Replacement of Domestic Items Relief), CGT trading-business reliefs, and FHL profits counting as pensionable earnings. Transitional rules allow existing capital allowance pools to continue receiving writing-down allowances until used up (Gov.uk: Clarification).
The cash basis has been the default for individual property businesses since 6 April 2017, not 2024/25 (HMRC PIM1092). The 2024/25 reform that is sometimes cited applied to self-employed traders.
Eligibility exclusions. Cash basis is not available to companies, LLPs, trustees, personal representatives, partnerships with corporate members, or property businesses with gross income exceeding the cash basis cap (HMRC PIM1093). If excluded, opt out on your tax return (box 20.2 on SA105).
Under cash basis: record income when received, expenses when paid. Claim the full cost of most assets when purchased (except cars). Tenancy deposits held under a protection scheme are not income on receipt — they become income only when retained (HMRC PIM1094).
HMRC requires records of all rental income and expenses. Records must be accurate, complete, and readable.
What to keep: rental income records per tenant, letting agent statements (gross rent, fees, net amounts), mortgage interest statements, insurance receipts, repair/maintenance invoices, mileage log, bank statements, deposit records, safety certificates, and tenancy agreements.
How long: At least five years after the 31 January submission deadline. For 2025/26, keep until at least 31 January 2032. HMRC can charge up to £3,000 for inadequate records.
| Time limit | Applies when |
|---|---|
| 4 years | Loss of tax not due to careless or deliberate behaviour |
| 6 years | Loss of tax caused by careless behaviour |
| 12 years | Offshore matters |
| 20 years | Deliberate behaviour or failure to notify chargeability |
(Source: HMRC CH56100)
MTD for Income Tax applies to landlords whose qualifying income (gross rental + self-employment income) exceeds the threshold (Gov.uk).
| MTD start date | Threshold | Assessed against |
|---|---|---|
| 6 April 2026 | Over £50,000 | 2024/25 |
| 6 April 2027 | Over £30,000 | 2025/26 |
| 6 April 2028 | Over £20,000 | 2026/27 |
Under MTD: keep digital records in compatible software, submit quarterly updates by 7 August, 7 November, 7 February, and 7 May, and submit a final declaration by 31 January. Multiple UK properties are a single income source — one set of quarterly updates. Overseas property is separate.
Letting agent statements. Under MTD's digital record-keeping rules, gross rental income and agent fees must be recorded as separate digital entries. Recording only the net amount the agent pays you is not compliant. In practice: record gross rent as income, agent fees as a separate expense, and any repairs the agent paid as separate expenses.
There are two genuine HMRC easements:
Soft landing for 2026/27. No penalty points for late quarterly updates during 2026/27 for those joining MTD in April 2026. This does not apply to late final declarations, late payment of tax, or taxpayers joining MTD in 2027/28 or later.
Read our full guide: Making Tax Digital for Income Tax: What's Changing from April 2026
Our MTD Quarterly Tracker has all four quarter periods, expense categories, bank reconciliation, and a submission-ready pack — designed for both sole traders and landlords.
View MTD Tracker — £5.99First review — corrections from original draft:
Second review — technical refinements:
This article is for general information only and does not constitute personal tax advice. Tax rules change — verify the latest guidance on Gov.uk before acting on any specific point. Article reviewed against live Gov.uk and HMRC sources on 27 April 2026.