If you receive rental income as a UK landlord, you are required to declare it to HMRC through Self Assessment. Whether you have one buy-to-let property or a large portfolio, the rules are the same — and they have become significantly more complex in recent years following the Section 24 mortgage interest restriction and the arrival of Making Tax Digital.
This guide explains exactly what you need to declare, what you can claim as expenses, how the Section 24 rules work in practice, and what has changed for landlords in 2026.
When Do You Need to Declare Rental Income?
You must report rental income to HMRC if:
Your gross rental income (before expenses) is more than £10,000 in the tax year, or your rental profit (after expenses) is more than £2,500.
If your gross rental income is between £1,000 and £10,000, you may be able to use the Property Income Allowance (a £1,000 annual exemption) instead of reporting individual expenses. For most landlords with significant mortgage costs or agent fees, this is less advantageous than claiming actual expenses.
If your gross rental income is under £1,000, you do not need to report it at all.
What Counts as Rental Income?
Rental income is not just the monthly rent. It includes:
The monthly rent received. Charges for water, gas, or electricity paid by tenants that cover your own costs (where you pay the utilities and recharge the tenant). Service charges included in the rent. Administration charges (late payment fees, check-in fees, where allowed). Income from lodgers in your own home (though the first £7,500 per year is tax-free under the Rent-a-Room scheme).
What Expenses Can You Claim?
Allowable expenses for landlords reduce your taxable rental profit. The key principle is that expenses must be incurred wholly and exclusively for the property letting business, and must be revenue costs (repairs and maintenance) rather than capital costs (improvements).
Fully allowable expenses:
Letting agent fees and management commissions. Landlord insurance (buildings and contents). Ground rent and service charges. Maintenance and repairs — like-for-like replacements such as a broken boiler or damaged flooring. Accountancy fees for preparing your rental accounts. Legal fees for renewing leases (not for creating new ones). Council tax and other utilities during void periods when you pay them. Advertising costs for finding tenants.
Not allowable as expenses (but may attract capital allowances):
Improvements that add value beyond restoring the property to its original condition. The purchase price of the property. Legal costs of purchasing the property.
Section 24 — The Mortgage Interest Restriction Explained
This is the most impactful tax change for buy-to-let landlords in recent years, and it is still frequently misunderstood.
Before April 2017, landlords could deduct mortgage interest in full as an expense from their rental income. This meant that a higher rate taxpayer paying £10,000 in mortgage interest on a rental property that generated £15,000 in rent had a taxable profit of only £5,000.
Since April 2020, the full restriction has been in place. Mortgage interest is no longer deductible as an expense. Instead, you receive a basic rate (20%) tax credit on your finance costs.
How this works in practice:
Rental income: £15,000
Allowable expenses (other than mortgage): £3,000
Taxable rental profit: £12,000
Tax at 40% (higher rate): £4,800
Less 20% finance cost tax credit on £10,000 mortgage interest: £2,000
Net tax liability: £2,800
Without Section 24 (old system), the tax would have been: (£15,000 minus £3,000 minus £10,000) × 40% = £800.
The increase in tax liability is real and significant for higher rate taxpayer landlords. Strategies to manage it include making pension contributions to reduce adjusted net income below the higher rate threshold, considering incorporation into a limited company (though this triggers its own considerations), and selling lower-yield properties where the Section 24 impact is most severe.
Making Tax Digital for Landlords in 2026
From 6 April 2026, MTD for Income Tax applies to landlords with property income above £50,000 per year. This means:
You must keep digital records of all rental income and expenses using HMRC-approved software. You must submit quarterly digital updates to HMRC — four times per year. You submit a final declaration (annual tax return) by 31 January following the end of the tax year.
For the 2026/27 tax year, Quarter 1 covers 6 April to 5 July 2026, with submissions due by 5 August 2026.
Landlords with property income between £30,000 and £50,000 will be brought within MTD from April 2027.
Furnished Holiday Lets — A Significant Change from April 2025
The Furnished Holiday Let (FHL) tax regime was abolished from 6 April 2025. FHL properties no longer qualify for:
The ability to offset losses against other income. Capital Gains Tax reliefs (Entrepreneurs Relief and other FHL-specific CGT reliefs). Pension contribution treatment based on FHL profits.
FHL properties are now treated as standard rental properties for all tax purposes. If you owned FHL properties and your tax planning relied on the FHL regime, you need to review your position urgently with a specialist accountant.
How to File Your Landlord Tax Return
Rental income is declared on the SA105 supplementary pages of your Self Assessment return. If you have foreign rental income, it goes on SA106 instead.
For each property (or if you have multiple properties, for each property type or as an overall figure), you declare:
Total rental income received. Allowable expenses (itemised or as a total). Mortgage finance costs (entered separately for the Section 24 credit calculation). Net rental profit or loss.
If you make a rental loss (your expenses exceed your income), the loss can typically be carried forward to offset future rental profits. Rental losses cannot generally be set against other types of income.
Common Mistakes Landlords Make on Their Tax Returns
Not declaring all rental income — HMRC receives data from letting agents, land registries, and now also from Airbnb and other platforms. Gaps in declaration are increasingly detected.
Claiming mortgage capital repayments as an expense — only the interest element of mortgage payments is relevant to Section 24. Capital repayments are never an expense.
Confusing repairs with improvements — replacing a kitchen like-for-like is a repair (deductible). Upgrading to a significantly better kitchen is an improvement (not deductible as a revenue expense).
Not claiming all allowable expenses — particularly agent fees, insurance, and professional fees which are straightforward and fully deductible but frequently overlooked.
Misapplying Section 24 — entering mortgage interest as a direct expense rather than as a finance cost for the tax credit calculation produces an incorrect return.
A Real-Life Example
Client A was a Stanmore landlord with two buy-to-let properties generating £28,000 in rent per year. He was preparing his own returns and had been entering his mortgage interest as a standard expense, as he had done before Section 24. His returns for the previous two tax years were therefore incorrect.
We reviewed both years' returns, recalculated using the correct Section 24 treatment, and found that his tax liability was actually £1,400 higher than he had reported. We also found £2,200 in deductible expenses he had not claimed.
The net effect of correcting both years was an additional liability of approximately £200 — a small amount, but important because an incorrect return left uncorrected can attract HMRC penalties if discovered during a compliance check. The corrections also established an accurate baseline for future years' planning.
Frequently Asked Questions
Need help with your tax position?
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