2025/26 tax year
UK tax rules for landlords
The numbers that decide whether a buy-to-let actually makes money — explained with worked examples.
Section 24 — mortgage interest restriction
Individual landlords can't deduct mortgage interest from rental income. Instead you get a tax credit worth 20% of finance costs. Higher and additional-rate taxpayers pay tax on income they never actually keep.
Example: £60,000 salary + this property
| Item | £ |
|---|---|
| Rent received | £12,000 |
| Running costs | £2,000 |
| Mortgage interest | £7,000 |
| Taxable profit (interest added back) | £10,000 |
| Extra tax from property (stacked on salary) | £4,000 |
| Less 20% × £7,000 credit | −£1,400 |
| Tax payable | £2,600 |
Same method as the calculator: the £10,000 profit stacks on top of a £60,000 salary, so it all falls in the 40% band.
What it really means
Real profit is £3,000. Tax is £2,600 — an effective rate of 87%.
Before Section 24 the tax would have been £1,200. That's £1,400 extra per year.
Section 24 can also push you into a higher band or reduce child benefit / personal allowance, because taxable income goes up.
SDLT England 2025/26
Standard rates from 1 April 2025. Additional dwellings (most BTL purchases and Ltd company buys) pay a 5% surcharge since the 31 Oct 2024 Budget.
| Portion of price | Standard | Additional property |
|---|---|---|
| £0 – £125,000 | 0% | 5% |
| £125,000 – £250,000 | 2% | 7% |
| £250,000 – £925,000 | 5% | 10% |
| £925,000 – £1,500,000 | 10% | 15% |
| £1,500,000 – above | 12% | 17% |
Example: £200,000 BTL → £125k×5% + £75k×7% = £11,500.
Income tax bands 2025/26 (England)
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | £0 – £12,570 (frozen) | 0% |
| Basic | £12,571 – £50,270 | 20% |
| Higher | £50,271 – £125,140 | 40% |
| Additional | over £125,140 | 45% |
Personal Allowance reduces by £1 for every £2 over £100,000.
Dividend & corporation tax
| Dividend band | Rate |
|---|---|
| Allowance | £500 tax-free |
| Basic | 8.75% |
| Higher | 33.75% |
| Additional | 39.35% |
| Company profit | Corporation tax |
|---|---|
| Up to £50,000 | 19% small profits |
| £50,001 – £250,000 | 25% less marginal relief |
| Over £250,000 | 25% main rate |
Capital Gains Tax on property
| Item | 2025/26 |
|---|---|
| Basic-rate taxpayers | 18% |
| Higher / additional | 24% |
| Annual exempt amount | £3,000 |
| Report & pay (UK residential) | within 60 days of completion |
Companies pay corporation tax on gains instead, with no annual exempt amount.
Furnished Holiday Lets — abolished April 2025
- The FHL regime ended on 6 April 2025 (1 April for companies).
- Holiday lets are now taxed like ordinary residential lets — Section 24 applies to finance costs.
- No more capital allowances on new furniture spend; replacement relief applies instead.
- Business Asset Disposal Relief (and rollover relief) no longer available on sale.
- FHL profits no longer count as relevant earnings for pension contributions.
Making Tax Digital for Income Tax
| From | Qualifying income over |
|---|---|
| 6 April 2026 | £50,000 |
| 6 April 2027 | £30,000 |
| 6 April 2028 | £20,000 |
Qualifying income = gross rent + self-employment turnover (not profit). You'll keep digital records, send quarterly updates via compatible software and file a final declaration. Jointly-owned property: count your share.