Use our UK rental income tax calculator - designed for landlords
Use our buy-to-let UK rental income tax calculator built for landlords and see how much tax you need to pay. It’s easy to use and will help you estimate your landlord tax liabilities. We also include advice to ensure you maximise your profitability.
Our tax calculator is based on you, as a landlord, being in one of the following 3 tax categories:
– A basic rate taxpayer earning less than £50,270 paying 20% income tax on property profits.
– A high-rate taxpayer earning more than £50,270 but less than £124,140. and paying 40% on property profits.
– An additional rate taxpayer earning more than £125,140 paying 45% on property profits.
Fill in the fields below on our landlord’s rental tax calculator to calculate rental income tax you need to pay HMRC.
We recommend using the calculator below on a desktop/laptop.
How does the Section 24 cap affect landlords?
The Section 24 mortgage interest relief cap means you cannot offset all mortgage interest costs against your rental income. HMRC now add back mortgage interest and finance costs, and you pay tax based on your relevant bandings.
HMRC provide landlords with relief on mortgage interest at 20%. This means if you paid mortgage interest costs of £800, you would get a relief of £160 (£800 X 20%). This is irrespective if you are a basic rate, a high rate or an additional rate taxpayer.
Landlords do not need to worry about how to work it out because our buy-to-let tax calculator does the hard work for you.
Is there any way to reduce the effect of the Section 24?
You can avoid overpaying tax by speaking with a property tax and accounting specialists like Optimise. Property agents do not have the expert knowledge required to navigate the complexities of property tax.
Here are some of the costs that may reduce your HMRC burden
– Letting agent’s fees
– Repairs & maintenance
– Utilities (if you pay for them)
– Council tax (if you pay)
– Mortgage interest (20% tax reduction)
Other ways to reduce Section 24’s impact include:
-Incorporation into a limited company whereby mortgage interest can still be deducted as a business expense
-Adjusting rent with increases where you can
-Reducing debt by paying off mortgage debt as quickly as you can
-Seeking professional guidance. Too often, people speak more with their letting agent than their property accountant. At Optimise Accountants, we offer a full range of services, from practical advice to filing.
Why not book a 1 to 1 appointment with our specialist property tax advisors today?
Should you buy a residential buy to let property investment in your name or a limited company?
One of the reasons why property investors use a property company is to save tax. The corporation tax of 19% is less than the basic rate band of 20%, much less than the 40% income band for high-rate taxpayers.
In April 2023, the corporation tax rules changed. Any property investment company that makes more than £50,000 in property profits are put on a sliding scale corporation rate from 19% to 25%.
This means a property limited company that makes more than £250,000 on its property rental activities will be subject is 25% corporation tax from April 2023.
Our calculator will help you understand what you need to pay HMRC and figure out a way to reduce it. Landlords that calculate their HMRC liability are the same ones that have a plan to reduce it. Ensure the money you collect from rent does not go entirely to HMRC.
Are mortgage rates higher for a limited company?
Mortgage brokers often tell us that it costs landlords a greater mortgage interest rate to use a property investment company than the mortgage interest rate in personal names.
However, we have also heard that mortgage interest rates in Furnished Holiday Lets (FHL) and House of Multiple Occupation (HMO) are similar rates of mortgage interest irrespective if the landlord purchases a buy-to-let in their name or a limited company.
When using a property rental tax calculator, you should understand the mortgage interest rates if you buy in your name or a limited company.
The tool will calculate the mortgage finance interest costs to derive your taxable property profits based on the mortgage entered. Calculate now and then plan to reduce your HMRC liability.
Sadly, letting agents are not equipped to tell you about taxation on your property portfolio, but you probably speak with them more than your accountant.
It might be worth speaking with your accountant more often.
Did section 24 increase tenant rent costs?
One issue the government did not consider with the Section 24 mortgage interest relief cap was who would pay the cost. We saw quickly that landlords increased property rent prices to make up for the additional amount they paid HMRC. It didn’t look like the government was successful in trying to penalise landlords, after all.
What taxes do landlords need to pay when taking money from their property investment company, and how can they make it easier?
There are many ways to take money out of a property investment company. It would help if you were mindful as a landlord who owns a property investment company that you pay two lots of tax
– Corporation Tax on the property profits made
– Income tax on any wages/dividends/interest that you extract from the property investment limited company
You do not need to worry about the calculations, as we have done the hard work for you with our rent income tax calculator.
What are the costs of running a property investment company?
Running a property investment company is not always cheap as you have to pay for additional items
– Increased bookkeeping requirements
– Filing of annual accounts to Companies House
– Filing of annual corporation tax returns to HMRC using the CT600 form
– File ATED reports to HMRC each year
This is on top of the fees you pay to your letting agent.
Next steps
Use our calculator to see how much a buy-to-let property will cost if owned in your name or a limited company. Based on the figures, decide whether to purchase a property in a limited company or in your name.
Mostly, we see that those who are basic rate taxpayers keep investing in property in their name. There are very few differences between owning property in their name and owning property inside a limited company.
Work out your property tax and then work with a specialist property tax accountant like Optimise to reduce it in the future.
A quick tip: When was the last time you have increased your tenants ‘rent? There is a big demand for rental properties and you may be missing out on an opportunity.
What is rental income tax?
Rental income tax is the tax you pay as a property owner and landlord on money earned from renting out property, such as a house or a flat in the UK.
How do I calculate it?
Use our rental income tax calculator on this page to estimate how much tax you’ll need to pay based on your rental earnings and expenses.
Do I need to declare rental income to HMRC?
Yes, you must declare all rental income to HMRC, even if the property is rented to family or friends.
What is the personal allowance for rental income?
The personal allowance is the amount of income you can earn each year without paying tax. This includes rental income and is currently £12,570 for the 2023/24 tax year. It has stayed the same since 2021/2022.
How is rental income taxed for higher-rate taxpayers?
Higher-rate taxpayers (those earning over £50,270) will pay a 40% tax on rental income above their personal allowance.
What is a buy-to-let (BTL) property in the UK, and how does it generate rental income?
BTL property in the UK is one purchased with the intention of renting it out. Rental income is generated when tenants pay regular rent to the property owner, providing a source of income for the landlord.
Are there any implications for UK investors with buy-to-let properties, and how can these be calculated?
Yes, UK landlords with BTL properties are subject to taxation on their rental income. You can use our dedicated calculator to calculate the tax charge, which helps determine the amount owed based on various factors such as rental income and allowable expenses.
What expenses can investors deduct?
You can deduct allowable expenses, such as mortgage interest, property maintenance, and letting agent fees. These deductions can help reduce the overall taxable rental income.
Are there any exemptions or relief options available for landlords with buy-to-let properties in the UK?
Depending on the specific circumstances, landlords may be eligible for certain exemptions and reliefs, such as the Private Residence Relief. Seeking professional advice can help you navigate all the available options to minimize tax.
How do I report rental income?
You report rental income on the property section of your self-assessment tax return.
What happens if I don’t declare my rental income?
Failing to declare rental income can result in penalties, interest on unpaid tax, and potential legal action from HMRC.
How can landlords stay informed about changes in regulations related to UK buy-to-let properties?
As a landlord you should regularly check official government updates and consult with tax and accounting professionals. A monthly retainer with an expert team can help you stay ahead of the curve pro-actively rather than re-actively. Keeping abreast of any amendments ensures you can adapt your strategy and make an informed decision fast.
