1. What is Rental Income Tax?

Rental income tax is the tax you pay on profits from renting out property. It's calculated by deducting allowable expenses from your gross rental income, then applying the appropriate tax rate.

2. How the Calculator Works

The calculator uses the formula:

Where:

• Gross Rental Income — Total income from property rentals before expenses
• Allowable Expenses — Deductible costs associated with renting the property
• Tax Rate — Your applicable income tax rate (basic rate is typically 20%)

3. Allowable Expenses Explained

Common Allowable Expenses: Property maintenance, letting agent fees, accountant fees, insurance, utility bills, council tax, mortgage interest (limited), repairs (but not improvements).

4. Using the Calculator

Instructions: Enter your total rental income, total allowable expenses, and applicable tax rate. The calculator will show your taxable profit and estimated tax due.

5. Frequently Asked Questions (FAQ)

Q1: What's the tax-free allowance for rental income?
A: For 2024-25, the property allowance is £1,000. If gross income is below this, no tax is due.

Q2: Can I claim mortgage payments as expenses?
A: Only the interest portion of mortgage payments is deductible, and it's limited to basic rate tax relief.

Q3: How does this differ for furnished holiday lettings?
A: FHLs have different rules with more generous expense claims and capital allowances.

Q4: When is rental income tax due?
A: Through Self Assessment, with payments due by 31 January following the tax year.

Q5: What records should I keep?
A: Keep all receipts and records of income/expenses for at least 5 years after filing.