1. What is Rental Income Tax?

Rental income tax is the tax you pay on profits from renting out property in the UK. It's calculated by deducting allowable expenses from your gross rental income and applying the appropriate tax rate to the remaining amount.

2. How Does the Calculator Work?

The calculator uses the UK rental income tax formula:

Where:

• \( \text{Gross Rental Income} \) — Total rental income before expenses (GBP)
• \( \text{Expenses} \) — Allowable expenses (GBP)
• \( \text{Rate} \) — Applicable tax rate (percentage)

Explanation: The calculation first determines your taxable profit (net rental income) by subtracting allowable expenses from gross income, then applies your tax rate to calculate the tax due.

3. Importance of Rental Income Tax Calculation

Details: Accurate rental income tax calculation is crucial for UK landlords to comply with HMRC requirements, budget for tax payments, and ensure proper financial planning.

4. Using the Calculator

Tips: Enter gross rental income and expenses in GBP, and your applicable tax rate as a percentage. All values must be valid (non-negative numbers, rate between 0-100%).

5. Frequently Asked Questions (FAQ)

Q1: What expenses can I deduct?
A: Allowable expenses include mortgage interest (partial), repairs, insurance, letting agent fees, and other costs wholly and exclusively for renting out the property.

Q2: What tax rates apply to rental income?
A: Rental income is taxed at your income tax rate (20% basic rate, 40% higher rate, or 45% additional rate in England and Wales).

Q3: Is there a tax-free allowance?
A: The £1,000 property allowance lets you earn up to £1,000 tax-free from property income each year.

Q4: How does mortgage interest affect tax?
A: Since April 2020, you can only claim a 20% tax credit on mortgage interest, not deduct it from rental income.

Q5: When is rental income tax due?
A: Through Self Assessment, with payments due by 31 January following the tax year end (5 April).