How much tax do you pay on rental income in the UK?
Written by: Marcus M. Araz, MBA, PhD · Updated:
A Turkish citizen resident in Turkey pays no tax on the first £12,570 of UK rental income, and 20% on the part between £12,571 and £50,270. Thanks to that allowance, the income tax on a single mortgage free flat earning £15,000 a year is zero in most cases. Had the same owner been resident in the United Arab Emirates there would be no allowance, and the same profit would carry £2,258 of tax. Below are three scenarios worked line by line, the filing calendar and penalties, the Making Tax Digital exemption and the 60 day rule that applies when you sell.
A worked example: a flat earning £15,000 a year
Tax is charged on the profit left after expenses, not on the gross rent. The expense lines below are kept close to the actual management and service charge figures of the Manchester and Liverpool flats in our portfolio.
| Item | Amount |
|---|---|
| Management fee (10% of gross rent) | £1,500 |
| Service charge | £1,200 |
| Landlord insurance | £250 |
| Accountancy and filing | £360 |
| Repairs and maintenance | £400 |
| Total expenses | £3,710 |
| Taxable profit | £11,290 |
| Personal Allowance | £12,570 |
| Income tax payable | £0 |
No tax arises because the profit stays below the Personal Allowance. The return is still filed: the allowance is not applied automatically, it is claimed on form SA109.
The same flat when the owner is resident in Dubai
Entitlement to the Personal Allowance is decided by nationality and residence together, not by nationality alone. Turkey is on the United Kingdom’s list; the United Arab Emirates, Qatar, Saudi Arabia and Kuwait are not.
| Buyer | Personal Allowance | Tax on the flat above |
|---|---|---|
| Turkish citizen resident in Turkey | Yes | £0 |
| Turkish citizen resident in Dubai | None | £2,258 |
| British or EEA citizen | Yes (residence does not matter) | £0 |
For a buyer living in the Gulf this single line can reverse the comparison between personal ownership and a limited company. Source: HMRC guidance RFIG30570.
How the calculation changes with a mortgage
Mortgage interest is not deducted as an expense; it is given as a 20% reduction against the tax calculated. The reduction is worked out on the lowest of three figures, the finance costs, the property profit and the income above the allowance, and it cannot create a refund.
| Item | Amount |
|---|---|
| Gross rent (two flats) | £30,000 |
| Expenses (excluding interest) | £7,400 |
| Taxable profit | £22,600 |
| Taxable amount after the Personal Allowance | £10,030 |
| Income tax at 20% | £2,006 |
| 20% reduction for mortgage interest (£9,000) | (£1,800) |
| Income tax payable | £206 |
For your own figure, the Rental income tax calculator where you can enter your own scenario and see the result line by line. Expected rents and yields city by city are on our cities with the highest rental yields page.
Rates
Rental income is taxed on top of your other UK income. From 6 April 2027 rental income will be taxed at its own rates, two points above the ones for salary; the table below sets the two periods side by side.
| Taxable income band | 2026/27 | 2027/28 onwards |
|---|---|---|
| The first £12,570 (personal allowance) | 0% | 0% |
| £12,571 to £50,270 | 20% | 22% |
| £50,271 to £125,140 | 40% | 42% |
| Above £125,140 | 45% | 47% |
| the mortgage interest tax reduction | 20% | 22% |
From 2027 allowances and reliefs will be applied first to other income such as salary and only then to property income. For an investor with no other UK income nothing changes; for anyone with both salary and rent the taxable amount grows.
Which expenses are deductible and which are not
An expense must be incurred wholly and exclusively for the letting business. The main items HMRC accepts and those it does not:
| Deductible | Not deductible |
|---|---|
| Management and letting agent fees | The capital part of the mortgage payment |
| Repairs, maintenance and general upkeep | Improvements to the property (capital expenditure) |
| Landlord insurance | Mortgage interest (not an expense, a 20% tax reduction) |
| Ground rent and service charge | Personal expenses |
| Accountant’s fee | Stamp duty paid on the purchase |
| Legal fees for lets of a year or less | Costs of your own use while the flat is empty |
| Advertising for tenants and communication costs |
If gross rental income is below £1,000 a year you can use the property allowance instead of claiming expenses, and you may not need to file at all. If your expenses exceed £1,000, claiming expenses is better.
Non-resident landlord registration (NRL)
If you live outside the United Kingdom for six months of the year or more, HMRC treats you as a non-resident landlord. Without registering, your letting agent must withhold 20% when paying the rent; if you have no agent and your tenant pays more than £100 a week, the tenant withholds it. Once registered, the rent is paid gross and you settle the tax once a year through your return. The difference in cash flow is large.
- Form: NRL1i for individuals. In joint ownership each owner applies separately.
- Condition: HMRC will not approve the application if your past returns or payments are late.
- Tax withheld is not lost: the agent issues a certificate at the end of the year and the amount is set against your return.
Filing calendar, instalments and penalties
Non-residents cannot use HMRC’s own online filing service. The return goes in by post, through commercial software, or through an accountant. If it goes by post the deadline moves back to 31 October, and that is the date most often missed.
| Date | What happens |
|---|---|
| 6 April | The tax year begins (it ends on 5 April) |
| 5 October | Registration deadline for first time filers |
| 31 October | Deadline for a paper return by post |
| 31 January | Deadline to file with software and to pay the tax |
| 31 January and 31 July | Two equal payments on account if last year’s tax exceeded £1,000 |
Late filing penalties run even when no tax is due: £100 on day one, then £10 a day after three months (up to £900), after six months 5% of the tax or £300 whichever is greater, and the same again after twelve months. If payment is late there are further 5% charges at 30 days, 6 months and 12 months, plus interest.
Making Tax Digital: most Turkish buyers are outside its scope
Making Tax Digital for Income Tax requires quarterly updates filed through software. The thresholds are phased: gross income over £50,000 in 2026/27, over £30,000 in 2027/28 and over £20,000 in 2028/29. For a non-resident landlord there are two automatic exemptions:
- Those who file SA109: anyone whose 2024/25 return included the residence pages (SA109) is automatically exempt for 2026/27. Every non-resident claiming the Personal Allowance files that form.
- Those without a National Insurance number: if you have no National Insurance number before the tax year begins the exemption is automatic and permanent, and signing up is not even possible.
So for a Turkish investor who has never lived in the United Kingdom and has no National Insurance number, Making Tax Digital creates no obligation today. If that changes, the return is still filed through the annual Self Assessment.
Personal ownership or a limited company
For a single property, personal ownership is usually simpler and cheaper, because a company has no Personal Allowance. As the portfolio grows and mortgage interest rises, an SPV limited company can pull ahead, because a company deducts interest in full. In exchange, corporation tax and dividend tax come into play.
| Item | Rate |
|---|---|
| Corporation tax, profits up to £50,000 | 19% |
| Corporation tax, profit between £50,000 and £250,000 | Marginal relief, an effective 26.5% |
| Corporation tax, profits above £250,000 | 25% |
| Dividend allowance | £500 a year |
| Dividend tax, basic rate | 10.75% |
| Dividend tax, higher rate | 35.75% |
| Dividend tax, additional rate | 39.35% |
| Accounting and annual return | £360 a year (£300 plus VAT) |
Which one suits you depends on your tax band, on whether you use a mortgage, on the country you are resident in and on when you plan to take the money out. The calculator shows both side by side in the same scenario.
When you sell: the 60 day rule
When a non-resident owner sells a home in the United Kingdom, the disposal must be reported to HMRC within 60 days . The duty applies even when no tax is due, and even when the property is sold at a loss, and it is separate from the annual return. For 2026/27 capital gains tax on homes is 18% or 24%, with a £3,000 annual exemption. On inheritance, see our page on UK inheritance tax for foreign owners .
Frequently asked questions
How much tax do you pay on rental income in the UK? Tax is charged on the profit left after expenses. For a Turkish citizen resident in Turkey the first £12,570 is tax free and the rest is taxed at 20%. On a mortgage free flat earning £15,000 a year, typical expenses leave a profit of £11,290 and no tax arises.
Can I use the personal allowance as a Turkish citizen? Yes if you are resident in Turkey. The right is given by reference to the country of which you are both a national and a resident, and Turkey is on that list. A Turkish citizen resident in Dubai, Qatar, Saudi Arabia or Kuwait has no entitlement. The claim is made on form SA109.
Do I also have to declare the rental income in Türkiye? If you are fully liable to tax in Turkey you declare your worldwide income, but under the double taxation treaty the tax paid in the United Kingdom is credited. The same income is not taxed twice.
Can I deduct mortgage interest as an expense? No. Interest is not deducted as an expense; it reduces the calculated tax by 20%. The reduction is worked out on the lowest of the finance costs, the property profit and the income above the allowance, and it cannot create a refund.
Which costs can I deduct? Management fees, insurance, repairs and maintenance, accountancy fees, ground rent and service charge are deductible. Improvements to the property, stamp duty and the capital part of the mortgage are not.
When is the return due? The tax year runs from 6 April to 5 April. Because non-residents cannot use HMRC’s online service, the deadline is 31 October for a paper return and 31 January with commercial software. The tax is paid on 31 January.
Do I need to file if I have no rental income or made a loss? If you are registered under the non-resident landlord scheme and HMRC has asked for a return, you file even with nil income. A loss is carried forward and set against property profits in later years.
Will I have to file quarterly digital updates? Most probably not. Non-resident landlords who file form SA109, or who have no National Insurance number, are kept outside the scope of Making Tax Digital.
What happens if I sell the flat? You must report the sale to HMRC within 60 days, even if no tax is due or you made a loss. For 2026/27 capital gains tax on homes is 18% or 24%, with a £3,000 annual exemption.
Related pages
Rental income tax calculator, cities with the highest rental yields, UK mortgage interest rates, council tax and Buying property in the UK.
Sources
Rates and allowances are for the 2026/27 tax year and were verified against HMRC sources on 20 September 2026: income tax rates and the Personal Allowance, rental income and the NRL scheme for people living abroad, working out rental income and expenses, the mortgage interest tax reduction, late filing penalties, payments on account, Making Tax Digital exemptions, the 60 day report and the 2027 property income rates. The expense lines in the worked examples are based on the actual management and service charge figures of flats in our portfolio. Legislation can change.
Legal notice
capital.works® (YATIRIM UK LIMITED) is a real estate advisory company; it does not provide legal or tax advice. The title and contract process is carried out by a solicitor registered in the UK. On the mortgage side, our FCA authorisation applies (FRN 1049015, authorised credit broker).
The next step
To see the figure for your own scenario, use the calculator . Tell us your budget and the country you are resident in, and we will send suitable flats with the gross rent, the expenses and the net yield after tax: Contact us.