Rental Income Tax Calculator

Section 24 of the Finance Act 2015 restricts the amount of mortgage interest that landlords can deduct from their rental income. Since April 2020, landlords can only claim tax relief at the basic rate of 20% on their mortgage interest, regardless of their marginal tax rate. Previously, higher-rate taxpayers could claim 40% or 45% relief.

Under Section 24, your rental income is calculated as: Annual Rent - Allowable Expenses = Gross Property Income. Mortgage interest is then added back to this figure. You receive a tax credit of 20% of your mortgage interest instead of deducting it. This grossed-up figure is added to your other income to determine your total tax liability.

Allowable expenses (excluding mortgage interest) include:

• Repairs and maintenance (not improvements)
• Letting agent fees
• Insurance (buildings, contents, landlord insurance)
• Accountancy fees
• Legal fees for tenancy agreements
• Advertising for new tenants
• Cleaning and gardening
• Utility bills (if you pay them as a landlord)
• Council tax and water rates
• Phone and broadband

No, you cannot deduct mortgage interest directly from your rental income anymore. Instead, you receive a tax credit worth 20% of your mortgage interest. For example, if you pay £6,000 in mortgage interest, you receive a £1,200 tax credit (20%). This is applied after calculating your total tax liability across all income sources.

Section 24 effectively pushes more of your income into higher tax brackets because the mortgage interest is no longer deducted before calculating your taxable income. This means landlords with mortgages may find themselves in a higher tax bracket than they would have been before Section 24, even if their rental profit hasn't changed.

Yes, if you receive rental income, you must notify HMRC and register for Self Assessment. You should complete a Landlord Tax Return (SA106) alongside your main Self Assessment tax return. You need to register even if your rental income is below the Personal Allowance, as you'll still need to declare it.

This calculator uses the official HMRC tax rates for the 2025/26 tax year (6 April 2025 to 5 April 2026). However, it provides an estimate only and cannot account for all individual circumstances such as losses brought forward, capital allowances, property improvements, or complex income scenarios. For precise calculations, we recommend consulting a qualified accountant.