Buy-to-let tax basics: what landlords need to know
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Quick answer: UK buy-to-let income is taxed as property income through Self Assessment. Mortgage interest is no longer fully deductible — you get a 20% tax credit instead — and capital gains tax applies when you sell.
Buying property to rent brings tax obligations that differ significantly from owning your home. Rental income is taxable, mortgage interest relief has been restricted since 2020, and selling triggers capital gains tax. Understanding the basics before you buy helps you calculate realistic returns.
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Read the full mortgages & first homes guide →Primary source: www.gov.uk/renting-out-a-property
Rental income tax
You pay income tax on rental profit — income minus allowable expenses. Report it on a Self Assessment tax return, even if you are employed and usually pay through PAYE.
Allowable expenses include letting agent fees, landlord insurance, maintenance and repairs, utility bills if you pay them, and accountancy fees. Capital improvements are not deductible against income but may reduce CGT on sale.
Section 24 mortgage interest restriction
Landlords can no longer deduct mortgage interest from rental income before calculating tax. Instead, you receive a tax credit equal to 20% of the interest paid.
This hits higher-rate taxpayers hardest. A landlord paying £10,000 annual interest gets a £2,000 credit, but a 40% taxpayer effectively pays tax on the full rental income before the credit — costing significantly more than under the old rules.
Capital gains tax on sale
When you sell a buy-to-let property, CGT applies to the gain — sale price minus purchase price, purchase costs, improvement costs, and selling costs.
You must report and pay CGT within 60 days of completion via HMRC's property CGT service. The annual exempt amount (£3,000 for 2026/27) reduces the taxable gain.
Common questions
Do I pay tax if my rental income is below the personal allowance?
You may not owe tax, but you must still report rental income on Self Assessment if it exceeds £1,000 (the property income allowance) or if you need to register for other reasons.
Can I offset losses against other income?
Property losses can be carried forward to offset future rental profits, but generally cannot be set against employment or other income.
Is buy-to-let still worth it after tax changes?
It depends on your numbers. Higher-rate taxpayers face significantly reduced returns after Section 24. Always model net yield after tax, void periods, and maintenance before buying.