1. What is UK Rental Income Tax?

UK rental income tax is calculated on the profit you make from renting out property after deducting allowable expenses. The tax rate depends on your total taxable income and which tax band you fall into.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• Gross Rental Income — Total rental income before expenses
• Expenses — Allowable costs associated with renting the property
• Tax Rate — Your applicable income tax rate (basic, higher, or additional rate)

Explanation: The calculation first determines your taxable profit (net income) then applies your marginal tax rate to calculate the tax due.

3. Importance of Rental Tax Calculation

Details: Accurate tax calculation helps with budgeting, tax planning, and ensuring compliance with HMRC requirements. It also helps landlords understand their true profit after tax.

4. Using the Calculator

Tips: Enter your total rental income, allowable expenses, and applicable tax rate. All values must be in GBP. The calculator will show your net profit and estimated tax liability.

5. Frequently Asked Questions (FAQ)

Q1: What expenses can I deduct?
A: Allowable expenses include mortgage interest (basic rate relief only), repairs, insurance, letting agent fees, and other costs wholly for rental purposes.

Q2: What are the current UK tax rates?
A: Basic rate (20%), higher rate (40%), and additional rate (45%). Scotland has slightly different rates.

Q3: Is mortgage interest still deductible?
A: Since 2020, mortgage interest receives a 20% tax credit rather than being fully deductible against rental income.

Q4: Do I need to declare rental income?
A: Yes, all rental income must be declared to HMRC through a Self Assessment tax return.

Q5: What about the property allowance?
A: The £1,000 property allowance lets small landlords earn up to this amount tax-free without declaring expenses.