Rental income tax calculator

Where you liveScottish Income Tax rates apply if your main home is in Scotland.

Other income for the year (salary, pension, profit)Before tax. It decides whether the rent is taxed at 20 %, 40 % or 45 %.GBP

Rent received in the yearTotal rent for the tax year, before any costs.GBP

Allowable expenses (not mortgage interest)Letting fees, repairs, insurance, ground rent, service charges.GBP

Mortgage interest and other finance costsInterest only, not the part of the payment that repays the loan.GBP

Use the £1,000 property allowance instead of expensesWorth it only when all your costs, interest included, are under £1,000.

Tax on your rental income

£1,200

Effective rate 12 %

Allowable expenses-£2,000
Rental profit£10,000
Income Tax on rental profit20 %−£2,000
Finance cost tax reduction20 %+£800
Rent left after costs and tax£4,800

An estimate under the rules for the chosen year, for typical cases. It is not tax advice: check the result with the tax office or an adviser before you file.

How it is calculated

Rental profit is the rent you receive minus allowable expenses such as letting fees, repairs and insurance. If your costs are small, you can deduct the £1,000 property allowance instead. If your rent is £1,000 or less, it is tax free.

The profit is added to your other income and taxed at your usual rates. That means it can push part of your income into the higher rate band. Scottish taxpayers pay Scottish rates on it.

Mortgage interest is not deducted from the profit. Instead you get a tax reduction of 20 % of the lowest of three amounts: your finance costs, your rental profit, and your income above the Personal Allowance. Any finance costs you cannot use are carried forward.

You let residential property in the UK in your own name, not through a company.
Other income is non-savings income such as salary, pension or self-employed profit, before the Personal Allowance.
Allowable expenses exclude mortgage interest, which gets a 20 % tax reduction instead.
If you use the £1,000 property allowance, you cannot deduct expenses or claim the finance cost reduction.
Rent of £1,000 or less is tax free automatically, so costs and mortgage interest are then left out.
Unused finance costs are carried forward to the next year; the calculator shows the amount but does not apply it.
Furnished holiday lets, rent-a-room relief, jointly owned property and capital allowances are not included.
Property income is taxed at the normal rates in 2025/26 and 2026/27. Separate property rates of 22 %, 42 % and 47 % start in April 2027.

Questions

Can I deduct mortgage interest from rental income?

Not directly. For residential property you get a tax reduction worth 20 % of the interest. If you pay higher rate tax, that is less than the 40 % you pay on the profit.

Can I deduct my mortgage repayments?

No. Only the interest and other finance costs count. The part of the payment that repays the loan does not.

When is the property allowance worth using?

When your real expenses, including mortgage interest, are below £1,000. Using it means you cannot claim any expenses or the finance cost reduction.

What changes for landlords in April 2027?

From 2027/28 property income gets its own rates of 22 %, 42 % and 47 %, and the finance cost reduction rises to 22 %. This calculator covers 2025/26 and 2026/27.

Sources

Now keep it on track Set the result as a budget in Spendee and see each month how much is left.

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