Last updated: 14 October 2026
How much rental income can you get before paying 40% tax?
It depends on your other income. Rental profit (not gross rent) is added to your salary, pension and other income. In England, Wales and Northern Ireland, you start paying 40% when total taxable income goes over £50,270 in 2026/27. So if you earn £30,000 from a job, you could make about £20,270 of rental profit before any of it is taxed at 40%. If you have no other income, it’s £50,270 of profit. Scotland has different bands for rental income.
2026/27 income tax bands (England, Wales, NI)
| Band | Taxable income | Rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
From April 2027, property income will be taxed at separate rates of 22%, 42% and 47%.
Profit, not rent
Rental profit is your rent minus allowable expenses, such as letting agent fees, repairs, insurance, service charges and accountancy fees. Mortgage interest isn’t deducted, but gives a 20% tax credit. This means landlords with large mortgages can be pushed into the higher rate even if their real profit is small.
Example
Holly earns £38,000 a year. She lets a flat for £15,000 a year, with £3,000 of expenses and £6,000 of mortgage interest. Her taxable rental profit is £12,000, as the interest isn’t deducted. Her total income is £50,000, just under the higher-rate threshold. She pays 20% on the £12,000, then gets a £1,200 tax credit for the interest.
Ways to stay in the basic rate band
- Make personal pension contributions, which extend the basic rate band
- Make Gift Aid donations
- Share ownership with a spouse who pays less tax, using Form 17 if appropriate
- Claim every allowable expense
Other thresholds to watch
- £60,000: High Income Child Benefit Charge starts
- £100,000: Personal Allowance starts to be withdrawn
- £50,000 qualifying income: Making Tax Digital for Income Tax from April 2026
Scotland
Scottish taxpayers pay Scottish rates on rental income, with a higher rate of 42% starting at a lower level than in the rest of the UK. Check the current Scottish bands.
Reporting rental profit
You report rental profit on the UK property pages of your Self Assessment return by 31 January after the tax year. If your profit pushes you into the higher rate, payments on account may start, so you could pay half of next year’s bill in advance too. If you are in Making Tax Digital, you also send quarterly updates through compatible software.
Joint owners
Each joint owner adds only their share of the profit to their own income. Married couples are taxed 50:50 by default, so splitting a property with a lower-earning spouse can keep more of the profit in the basic rate band.
Common mistakes
- Adding gross rent rather than profit when checking the threshold
- Forgetting that mortgage interest is not deducted from profit
- Ignoring the Personal Allowance taper above £100,000
Frequently asked questions
Does gross rent count towards the £50,270?
No, only the profit.
Does the 40% apply to all my rent?
Only the part of the profit above the threshold.
Is the tax credit for mortgage interest restricted?
Yes, to 20% of the interest, profits or income above the Personal Allowance, whichever is lowest.
Can I pay into a pension to avoid 40%?
Yes, it extends your basic rate band.
Related: what expenses landlords can claim, Form 17 for landlords and mortgage interest on let properties.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with working out your rental profit and tax band. 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.
