UK Buy-to-Let Profit & Tax Calculator 2026
Work out a UK rental property's real profit after mortgage interest (Section 24 20% credit), management, maintenance and voids, and the income tax due at your rate.
| Gross rent (after voids) | — |
|---|---|
| Running costs (management, maintenance, other) | — |
| Mortgage interest | — |
| Cash profit before tax | — |
| Taxable rental profit (interest NOT deducted — Section 24) | — |
| Income tax on rental profit | — |
| Less 20% tax credit on mortgage interest | — |
| Net tax due | — |
| Gross yield / net yield / return on cash invested | — |
In short
Since Section 24, individual UK landlords cannot deduct mortgage interest from rental profit; the profit is taxed at 20/40/45% and a 20% tax credit on the interest is given instead, so a higher-rate taxpayer with a 75% mortgage can owe tax on a cash loss. Allowable costs still include agent fees, repairs, insurance and safety certificates.
Who this is for: UK landlords and prospective investors checking real after-tax profit under Section 24 before buying or refinancing.
How buy-to-let profit is taxed (Section 24)
- Rental profit = rent received − allowable expenses (agent fees, repairs, insurance, safety certificates, service charges, ground rent, accountancy). Mortgage interest is not an allowable expense for individual landlords since April 2020.
- That profit is added to your other income and taxed at 20/40/45%.
- You then get a tax credit of 20% of the mortgage interest (capped at the tax on the property profit). For a basic-rate taxpayer this fully offsets; for a higher-rate taxpayer only half the interest's tax cost is relieved — which is why highly geared landlords can owe tax on a cash loss.
Other points: the £1,000 property allowance can replace expenses on very small lets; the Renters' Rights Act 2025 ended Section 21 "no-fault" evictions and fixed terms; EPC C will be required for new tenancies from 2028 (planned); and companies deduct interest in full but pay corporation tax, SDLT surcharge and higher mortgage rates.
Assumptions
- Gross rent = monthly rent × 12 × (52 − void weeks) ÷ 52; costs = management % + maintenance % of value + other.
- Taxable profit excludes interest; tax = income tax on (other income + profit) − tax on other income, 2026/27 bands with PA taper.
- Credit = 20% × min(interest, profit), capped at the tax due; return on cash = after-tax profit ÷ (value − mortgage).
Worked example
Gross rent after 2 void weeks = £12,692; costs = £1,269 management + £2,200 maintenance + £900 other = £4,369; interest = £8,580 → cash position −£257 a year before tax.
Taxable profit ignores the interest: £8,323. On top of £45,000 salary, £5,270 falls in the basic band and £3,053 in the higher band: tax = £1,054 + £1,221 = £2,275. Credit = 20% × £8,323 = £1,665 → net tax £611.
After tax: −£868 a year — a deal that loses cash and owes tax, the classic Section 24 trap at 75% loan-to-value and 5%+ rates. At a 4% rate the same flat makes about £770 after tax; the gross yield is 6.0% either way.
Frequently asked questions
Can I still deduct mortgage interest from rental income?
Not as an expense. Individual landlords get a 20% tax credit on the interest instead; limited companies deduct it in full.
Is it better to hold buy-to-let through a company?
For higher-rate taxpayers with mortgages, often yes on income tax — but company mortgages cost more, extracting profit as dividends is taxed again, and transferring an existing property triggers SDLT and CGT. Model both.
What tax do I pay when I sell?
Capital gains tax at 18%/24% on the gain after the £3,000 allowance, reported within 60 days — see the capital gains calculator.
Do I need to register with HMRC?
Yes, for Self Assessment, if rental profit is over £1,000 (or you want to claim expenses); from April 2026 landlords with £50,000+ of property income must use Making Tax Digital quarterly updates.
What is Section 24 for landlords?
The rule since April 2020 that mortgage interest is not deductible from rental profit for individuals; instead a 20% tax credit on the interest is given.
What expenses can a landlord claim?
Letting agent and management fees, repairs and maintenance (not improvements), insurance, gas and electrical safety certificates, service charges, ground rent, accountancy and legal fees for lets.
People also ask
How is buy-to-let profit taxed?
Rental profit is added to your income and taxed at 20/40/45%; mortgage interest is not deductible but earns a 20% tax credit (Section 24).
What expenses can a landlord deduct?
Letting agent fees, repairs and maintenance, insurance, ground rent and service charges, accountancy, and replacement of domestic items.
What is a good rental yield in the UK?
Gross yields of 5–8% in the north and Midlands, 3–5% in London; net yield after costs and tax is typically 2–4 points lower.
Do I pay extra stamp duty on a buy-to-let?
Yes — the 5% additional-property surcharge on every SDLT band.
Is capital gains tax due when I sell?
Yes at 18% (basic) or 24% (higher) on the gain above the £3,000 annual exempt amount, reported and paid within 60 days of completion.
Is a limited company better for buy-to-let?
Companies deduct full mortgage interest and pay 19–25% corporation tax, but extracting profits as dividends is taxed again; it suits higher-rate taxpayers building a portfolio.
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