Answers · UK 2025/26

How much tax will I pay on GBP 12,000 of rental income a year?

It depends on your other income. A basic-rate taxpayer pays 20% on profit, so on GBP 12,000 rent with GBP 2,000 of allowable costs the GBP 10,000 profit costs GBP 2,000 tax. A higher-rate landlord pays 40% (GBP 4,000).

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

Rental profit is taxed as income on top of your salary, pension or other earnings, at your marginal rate. You are taxed on profit, not gross rent: deduct allowable expenses such as letting agent fees, repairs (not improvements), insurance, ground rent and service charges. Worked example: GBP 12,000 annual rent minus GBP 2,000 of allowable costs leaves GBP 10,000 taxable profit. A basic-rate taxpayer (income within the GBP 50,270 higher-rate threshold) pays 20% = GBP 2,000. A higher-rate taxpayer pays 40% = GBP 4,000. An additional-rate taxpayer pays 45% = GBP 4,500. Crucially, mortgage interest is no longer a deductible expense for individual landlords - instead you get a 20% basic-rate tax credit on the interest. So if you paid GBP 4,000 of mortgage interest, your profit calculation ignores it, but you reduce your final tax bill by GBP 800 (20% of GBP 4,000). This is why higher-rate landlords often pay more under the current rules than under the old system. If rent is your only income and below the GBP 12,570 Personal Allowance, you may owe nothing. The GBP 1,000 property allowance can be claimed instead of expenses if your costs are low. You report rental income through Self Assessment. Use the rental yield calculator to assess the investment and the self-employed tax calculator to estimate the bill. Always confirm allowable expenses and reporting deadlines on gov.uk.