1. What is Rental Income Tax?

Rental income tax is the tax payable on profits from renting out property. For the 2024-25 tax year, you're taxed on your rental profits after deducting allowable expenses and any tax-free allowances.

2. How Does the Calculator Work?

The calculator uses the rental tax formula:

Where:

• \( Rental\ Income \) — Total rent received before any deductions
• \( Allowances \) — Tax-free allowance (e.g., £1,000 property allowance in UK)
• \( Expenses \) — Deductible costs like repairs, mortgage interest, agent fees
• \( Tax\ Rate \) — Your income tax rate (basic 20%, higher 40%, additional 45%)

Explanation: The calculator first deducts your allowances and expenses from rental income to determine taxable profit, then applies your tax rate.

3. Importance of Rental Tax Calculation

Details: Accurate rental tax calculation helps with budgeting, tax planning, and ensuring compliance with HMRC requirements. Underpayment can lead to penalties while overpayment means losing money unnecessarily.

4. Using the Calculator

Tips:

• Enter gross rental income (before any deductions)
• Include all allowable expenses (repairs, insurance, agent fees, etc.)
• Use £1,000 as default allowance (UK property allowance)
• Select your appropriate tax rate based on total income

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: Is there a tax-free allowance?
A: Yes, the UK property allowance is £1,000 per year (2024-25). If expenses exceed this, it's better to claim actual expenses.

Q3: How does mortgage interest affect tax?
A: For 2024-25, you can claim basic rate (20%) tax relief on mortgage interest payments, not the full amount.

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

Q5: When is rental income tax due?
A: For 2024-25, tax is due by 31 January 2026 under Self Assessment, with payments on account possibly required.