On £14,400 of rent, £4,228 of allowable expenses brings taxable profit down to £10,172, and after a £960 credit for mortgage interest the tax is £1,074.40 in 2026/27.
A landlord on a £30,000 salary who lets one flat for £1,200 a month
| Salary, taxed through PAYE | £30,000.00 |
| Rent received | £14,400.00 |
| Less letting agent fees | −£1,728.00 |
| Less landlord insurance | −£420.00 |
| Less repairs (boiler part and repainting) | −£950.00 |
| Less gas safety and electrical certificates | −£180.00 |
| Less accountant's fee | −£600.00 |
| Less replacement fridge-freezer | −£350.00 |
| Taxable rental profit | £10,172.00 |
| Tax on the profit | |
|---|---|
| Income tax: £10,172 at 20% | £2,034.40 |
| Less finance cost credit: 20% of £4,800 | −£960.00 |
| Tax on the rent | £1,074.40 |
England. One residential property owned by one person, let unfurnished apart from white goods. All assumptions and rates
Where £10,172 of rental profit ends up
Assumptions and rates
- England. One residential property owned by one person, let unfurnished apart from white goods.
- The salary uses the personal allowance, and the rental profit stays inside the basic rate band.
- £4,800 of mortgage interest paid in the year.
- Income tax 20%
- Finance cost credit 20% of the mortgage interest
What counts as an allowable expense?
Costs that are wholly and exclusively for letting the property. HMRC's list includes general maintenance and repairs; water rates, council tax, gas and electricity when you pay them; landlord insurance; letting agent, accountant and legal fees; ground rent and service charges; cleaners and gardeners; advertising; and the business share of vehicle running costs.
Is a new kitchen a repair?
It depends on what it replaces. A repair restores something to its original condition, such as replacing broken roof tiles or a failed boiler, and that is deductible. Replacing a worn kitchen with a similar one is usually a repair even if the new units are more modern.
Adding something new, such as an extension or a kitchen where there was none, is a capital improvement. It does not come off rental profit, but keep the receipts, because it reduces the gain when you sell. How much capital gains tax will I pay when I sell a buy-to-let? shows how.
Can I claim for furniture and appliances?
When you replace them, yes. Replacement of domestic items relief covers replacing furniture, furnishings and appliances, such as the fridge-freezer in the working. The first purchase for a property is not covered.
Why isn't the mortgage interest in the list of expenses?
Because for residential lets it comes in as a 20% tax credit after the profit is worked out. For a basic rate landlord like this one the result is the same as deducting it. For higher rate landlords it is not, which How does Section 24 change the tax on my rental income? works through.
Should I use the £1,000 property allowance instead?
Only when your expenses are under £1,000. The allowance replaces your expenses, so here it would leave a profit of £13,400 instead of £10,172. You also cannot use it in a year you claim the finance cost credit on a residential mortgage.
What records should I keep?
Rent received, invoices and receipts for every expense, mortgage interest statements, and the purchase and improvement costs for the property. The improvement costs matter years later when you sell.
What this doesn’t cover
- Furnished holiday lets.
- Letting a room in your own home under the Rent a Room scheme.
- Commercial property and property held in a company.
- Jointly owned property.
- Scottish income tax rates.
Common questions
No. Your own time is not an expense. Wages you pay someone else, such as a cleaner or gardener, can be.
No. The purchase price, stamp duty and legal fees on buying are capital costs that reduce the gain when you sell.
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