1. What is UK Rental Income Tax?

The UK Rental Income Tax is the tax payable on profits from renting out property in the UK, calculated as gross rental income minus allowable expenses, then taxed at your applicable income tax rate (20% for basic rate or 40% for higher rate taxpayers).

2. How Does the Calculator Work?

The calculator uses the HMRC-approved formula:

Where:

• Gross Rental Income — Total rental income before expenses
• Allowable Expenses — HMRC-approved deductible expenses
• UK Tax Rate — 20% (basic rate) or 40% (higher rate)

Explanation: Only the profit (income minus expenses) is taxable. The tax rate depends on your total taxable income bracket.

3. Importance of Rental Income Tax Calculation

Details: Accurate tax calculation ensures compliance with HMRC regulations, helps with financial planning, and avoids penalties for underpayment.

4. Using the Calculator

Tips: Enter gross rental income and allowable expenses in GBP. Select your applicable tax rate based on your total taxable income.

5. Frequently Asked Questions (FAQ)

Q1: What counts as allowable expenses?
A: Mortgage interest (restricted), repairs, insurance, letting agent fees, and other costs wholly for rental purposes.

Q2: How is mortgage interest treated?
A: Since April 2020, only a 20% tax credit is available on mortgage interest, not full deduction.

Q3: When is rental income tax due?
A: Through Self Assessment, with payments due by 31 January following the tax year.

Q4: What if I make a loss?
A: Losses can be carried forward to offset against future rental profits.

Q5: Are there different rules for furnished lettings?
A: Furnished holiday lettings have different rules and may qualify for certain tax reliefs.