Last updated: 14 October 2026
Does HMRC ever say you don’t have to pay tax on rental profits?
Only in a few situations. Rental profits are taxable income, and you must normally report them to HMRC and pay tax. But you may not owe tax if your rental income is £1,000 or less (the property allowance), you let a furnished room in your own home for £7,500 or less a year (Rent a Room relief), or your total income, including the rent, is within your £12,570 Personal Allowance. Even then, you may still need to tell HMRC.
When no tax is due
| Situation | Tax due? | Do you need to report? |
| Gross property income of £1,000 or less | No | No, unless you file a return for other reasons |
| Lodger in your own home, rent £7,500 or less | No | No, unless you choose to claim actual costs |
| Total income within the Personal Allowance | No | Yes, if gross rent is over £1,000 |
| Rental loss after expenses | No | Yes, to carry the loss forward |
| All other rental profits | Yes | Yes, on Self Assessment |
The £1,000 property allowance
If your gross rental income is £1,000 or less, it’s tax-free and doesn’t need reporting. If it’s more, you can deduct either the £1,000 allowance or your actual expenses, but not both. The allowance suits landlords with very low costs.
Rent a Room
If you let furnished accommodation in your main home, the first £7,500 a year is tax-free, or £3,750 each if the income is shared with someone else. If you earn more, you can pay tax on the excess over £7,500, or on actual profit after expenses.
Example
Mark lets a garage for £900 a year. It’s under £1,000, so it’s tax-free and he doesn’t need to report it. His neighbour Helen lets a flat for £9,600 a year and has £2,000 of costs. She has a taxable profit of £7,600 and must report it. If she has a salary of £30,000, she pays 20% on the profit: £1,520.
Expenses that reduce your profit
Common deductible costs include letting agent fees, repairs, insurance, ground rent, service charges, accountancy fees and replacing furnishings in a furnished let. Improvements, such as an extension, aren’t deductible from rent but can reduce Capital Gains Tax when you sell. Keeping good records can bring a profit within the Personal Allowance.
Making Tax Digital
From 6 April 2026, landlords and sole traders with qualifying income over £50,000 must keep digital records and send quarterly updates under Making Tax Digital for Income Tax. The threshold falls to £30,000 from April 2027.
Beware misleading claims
You may see online claims that HMRC lets landlords off tax, or that rent paid into a partner’s or relative’s account isn’t yours. They’re false. Tax is due on the income you’re entitled to, wherever it’s paid.
Frequently asked questions
I let my home while abroad; is it taxable?
Yes, and you may need the Non-Resident Landlord Scheme.
Can I deduct mortgage interest?
You get a 20% tax credit instead.
What if I’ve never declared rent?
Use HMRC’s Let Property Campaign.
Does tax apply to rent from family?
Yes, if it’s commercial rent.
Related: what landlords can claim, disclosing undeclared rent and rental income before 40% tax.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with rental income tax. See our landlord accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
