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. It's part of your income tax calculation and must be reported to HMRC through a Self Assessment tax return.

2. How Does the Calculator Work?

The calculator uses HMRC's rental income tax rules:

Where:

• Gross Rental Income — Total rental income before expenses
• Allowable Expenses — HMRC-approved costs of renting out the property
• UK Tax Rate — 20% (Basic Rate) or 40% (Higher Rate) depending on your income band

Explanation: Only the profit (after allowable expenses) is taxed at your applicable income tax rate.

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 (20% or 40%). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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

Q2: Is mortgage interest fully deductible?
A: No, since April 2020 only a 20% tax credit is available on mortgage interest, not full deduction.

Q3: What if I make a loss?
A: Losses can be carried forward to offset against future rental profits.

Q4: Are there different rules for furnished lettings?
A: Yes, you may claim 10% wear and tear allowance for furnished properties.

Q5: When is the tax due?
A: Through Self Assessment by January 31 following the tax year end.