UK · Property tax 2026–27
Buy-to-let tax calculator.
See the extra Income Tax on your rental profit after Section 24: mortgage interest is not deducted, but you get a 20% basic-rate tax reduction, with any excess carried forward.
Rates and rules verified 30 September 2026 against GOV.UK. England, Wales and Northern Ireland bands only; Scottish bands are not modelled. A planning estimate, not tax advice or a Self Assessment calculation.
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Worked example
Rental income £20,000, running costs £7,000, mortgage interest £15,000, other income £36,000. Property profit is £13,000 (interest is not deducted), taxed at 20% = £2,600. The reduction is 20% of the lowest of finance costs (£15,000), property profit (£13,000) and income above the Personal Allowance (£36,430). The lowest is £13,000, so the reduction is £2,600, the extra tax is nil, and £2,000 of finance costs is carried forward.
How it is worked out
- Property profit = rental income minus allowable costs. Finance costs are not deducted.
- Tax is charged on that profit at your marginal rates, using the 2026–27 bands: £12,570 Personal Allowance (tapered above £100,000), 20% to £50,270, 40% to £125,140, 45% above.
- Reduction = 20% of the lowest of: finance costs (including any brought forward), property profits, and adjusted total income above the Personal Allowance. It cannot exceed your total tax.
- Finance costs not used are carried forward to the next year.
- Property allowance: £1,000 can replace actual costs, but it cannot be used if you claim relief on residential finance costs.
Sources: GOV.UK: how the finance cost restriction is worked out, GOV.UK Income Tax rates, GOV.UK property allowance. As of 30 September 2026. Ignores savings and dividend income, pension relief, losses, Gift Aid, rent-a-room, jointly owned property splits and company ownership.
FAQ
Can I deduct mortgage interest from rental income?
Not for residential property held personally. You get a basic-rate (20%) tax reduction instead.
Why is some interest carried forward?
The reduction is limited to the lowest of finance costs, property profit and income above the Personal Allowance. Anything unused carries forward.
Does this apply to limited companies?
No. Companies deduct interest differently and are not modelled here.
Does this cover Scotland?
Not yet. Scottish bands differ, so use a Scotland-specific calculation.
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