1. What is Rental Income Tax?

Rental income tax is the tax you pay on profits from renting out property. It's calculated by subtracting allowable expenses from your gross rental income and applying the appropriate tax rate for the 2024-25 tax year.

2. How Does the Calculator Work?

The calculator uses the rental tax formula:

Where:

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

Explanation: The equation calculates taxable profit by subtracting expenses from income, then applies your tax rate to determine the amount owed.

3. Importance of Rental Tax Calculation

Details: Accurate rental tax calculation ensures compliance with HMRC regulations, helps with financial planning, and avoids unexpected tax bills or penalties.

4. Using the Calculator

Tips: Enter your total rental income and all allowable expenses in pounds sterling. Select your applicable tax rate (20% for basic rate taxpayers in 2024-25).

5. Frequently Asked Questions (FAQ)

Q1: What counts as allowable expenses?
A: Allowable expenses include property maintenance, letting agent fees, insurance, and other costs wholly and exclusively for renting the property.

Q2: Is mortgage interest still deductible?
A: For 2024-25, you can claim a 20% tax credit on mortgage interest payments rather than deducting the full amount.

Q3: What's the tax-free allowance for rental income?
A: The £1,000 property allowance was removed in April 2024, so all rental income is potentially taxable.

Q4: How does this differ for furnished holiday lettings?
A: Furnished holiday lettings have different rules and may qualify for capital allowances and other reliefs.

Q5: When is rental income tax due?
A: Rental income tax is paid through Self Assessment, with payments due by 31 January following the tax year.