Answers · UK 2025/26

How much tax will I pay on £20,000 of rental income a year?

It depends on your other income. A basic-rate taxpayer pays 20% on profit, so on £20,000 rent with allowable costs deducted, a £16,000 taxable profit costs £3,200 tax. A higher-rate landlord pays 40% (£6,400); an additional-rate landlord pays 45% (£7,200).

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

Full answer

Rental profit is taxed as income on top of your salary, pension or other earnings, at your marginal Income Tax rate. You are taxed on profit, not gross rent, so deduct allowable expenses such as letting agent fees, repairs (not improvements), insurance, ground rent and service charges before applying the rate. Worked example: £20,000 annual rent minus £4,000 of allowable costs leaves £16,000 taxable profit. A basic-rate taxpayer pays 20% = £3,200. A higher-rate taxpayer pays 40% = £6,400. An additional-rate taxpayer pays 45% = £7,200. At £20,000 gross rent, many landlords will have other income (a job, pension or self-employment) that already uses up their basic-rate band, pushing some or all of the rental profit into the 40% higher rate. Mortgage interest is no longer directly deductible from rental profit for individual landlords -- instead you receive a 20% basic-rate tax credit on the interest paid after the tax calculation, so a higher-rate landlord with, say, £6,000 of mortgage interest would only get back £1,200 in relief rather than the full 40% they would get if it were a normal deductible expense, often making incorporation into a limited company worth considering at this scale of letting. You must register for Self Assessment and report this income; use the Rental Income Tax calculator to model your position including mortgage interest relief.