Worked example
Chris lives in England, earns a £40,000 salary and lets out one flat. In 2026/27 the rent comes to £20,000, running costs are £3,000 and mortgage interest is £6,000.
| Amount | |
|---|---|
| Rent less running costs (interest is not deducted) | £17,000.00 |
| 2026/27 | |
| Tax on salary + rent (£57,000) minus tax on salary alone | £4,746.00 |
| Less mortgage interest credit: £6,000 × 20% | −£1,200.00 |
| Tax on rent 2026/27 | £3,546.00 |
| 2027/28 (same figures, new rates) | |
| £10,270 at 22% (rest of the basic rate band) | £2,259.40 |
| £6,730 at 42% | £2,826.60 |
| Less mortgage interest credit: £6,000 × 22% | −£1,320.00 |
| Tax on rent 2027/28 | £3,766.00 |
Chris pays £220 more a year from April 2027. After costs, interest and tax, the flat leaves £7,454 in 2026/27 and £7,234 in 2027/28. With £20,000 of qualifying income — not over £20,000 — Making Tax Digital does not apply to Chris yet, but a small rent rise would bring it in from April 2028.
How it works, in plain English
How rental profit is taxed
Your rental profit is the rent minus allowable running costs: agent fees, repairs (not improvements), insurance, safety certificates, service charges and similar. It is added to your other income and taxed at your normal rates — so for many landlords with a job, some or all of it is taxed at 40%.
Mortgage interest
Residential landlords cannot deduct mortgage interest from rent. Instead you get a tax credit worth 20% of the interest in 2026/27. The credit is capped at 20% of the lowest of your finance costs, your rental profit and your income above the personal allowance; any unused amount carries forward. Higher-rate taxpayers effectively get only half the relief they would expect.
New property income rates from April 2027
From 6 April 2027 property income in England and Northern Ireland gets its own rates: 22% basic, 42% higher and 47% additional — two points above the rates on earnings. The mortgage interest credit rises to 22% to match. Wales and Scotland are expected to set their own property rates, so for those nations this calculator keeps today's rates for 2027/28. It assumes your personal allowance is used against your other income first, and that bands stay frozen.
The £1,000 property allowance
If your costs are tiny, you can deduct a flat £1,000 instead of real expenses — but then you cannot claim the mortgage interest credit. The calculator compares both and uses whichever means less tax.
Making Tax Digital
MTD for Income Tax counts gross rent plus gross self-employed turnover. Over £50,000 means quarterly digital updates from April 2026, over £30,000 from April 2027, and over £20,000 from April 2028.
Frequently asked questions
Can landlords claim mortgage interest?
Not as an expense. You get a tax credit instead: 20% of the interest in 2026/27, rising to 22% from April 2027 in England and Northern Ireland. The calculator applies it automatically and shows how much it is worth.
What are the new landlord tax rates from April 2027?
Property income in England and Northern Ireland will be taxed at 22%, 42% and 47% instead of 20%, 40% and 45%. Welsh and Scottish property rates are for those governments to set.
Does Making Tax Digital apply to landlords?
Yes. If your gross rent plus any self-employed turnover is over £50,000 (2024/25), £30,000 (2025/26) or £20,000 (2026/27), MTD starts in April 2026, 2027 or 2028 respectively. Jointly owned property counts at your share only.
Should I use the £1,000 property allowance?
Only if your real costs are under £1,000 and you have no mortgage interest to claim. Using the allowance means giving up all expense deductions and the finance cost credit for that year.
What if I own the property jointly?
Enter only your share of rent, costs and interest. Married couples and civil partners normally split rent 50/50 unless they have told HMRC about a different actual ownership split.
When is the tax on my 2026/27 rent due?
By 31 January 2028, with payments on account for 2027/28 if your Self Assessment bill is over £1,000 and less than 80% of your tax is collected through PAYE. See the Self Assessment deadlines guide.
Estimates only, not tax advice. These figures are a guide based on the information you enter and the 2026/27 rules. Your own position can differ — check GOV.UK or an accountant before relying on them.
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