How rental income is taxed
If you let out a property you own personally, the profit is added to your other income and taxed through self assessment. Profit means the rent you receive, minus the running costs the rules allow you to deduct. The tax rate you pay depends on your total income, so the same flat can cost one owner far more in tax than another.
Fulham has a lot of accidental landlords. People who bought a flat near Fulham Broadway, moved in with a partner or out to a bigger house in Putney, and kept the flat to rent. Many do not realise they need to register for self assessment until a letter from HMRC arrives. If that sounds familiar, we can help you catch up and put things right.
Very small amounts of rental income can be covered by the £1,000 property allowance instead of claiming actual expenses. For most landlords with a whole flat or house, claiming real costs works out better.
Letting a room in the home you live in is treated differently. Under the Rent a Room scheme, you can receive a set amount of rent each year from a lodger free of tax without claiming expenses. It only applies to furnished accommodation in your main home, not to a separate flat.
Mortgage interest and Section 24
Landlords who own residential property in their own name can no longer deduct mortgage interest from their rental profit. Instead, under the rules known as Section 24, you get a tax credit worth basic rate tax on the interest. Higher rate taxpayers therefore get less relief than the interest actually costs them.
This catches people out. Your rental profit for tax can look much higher than the cash you actually keep, and it can push your total income into a higher band or affect things like the child benefit charge. We show you the real after tax position so you can decide whether to keep, sell, refinance or restructure. These rules do not apply in the same way to commercial property or to property held in a limited company.
What is included
- Rental income and expenses accounts for each property
- Self assessment property pages and full tax return
- Section 24 finance cost calculations
- Repairs versus improvements review
- Making Tax Digital quarterly updates for landlords
- Joint ownership and spouse income split checks
- Help catching up on undeclared rental income
- Capital gains tax planning ahead of a sale
What landlords can and cannot claim
The key test is whether a cost is a running expense or an improvement. A repair that puts something back to how it was is usually allowable straight away. Work that makes the property better than before, like a new extension, is capital and is only taken into account when you sell.
- Letting agent and management fees
- Repairs and maintenance, such as fixing a boiler or redecorating between tenants
- Buildings and landlord insurance
- Ground rent, service charges and council tax for empty periods you are liable for
- Gas safety certificates, electrical checks and other required inspections
- Replacing furniture, appliances and carpets on a like for like basis
- Accountancy fees for preparing your rental accounts
Making Tax Digital for landlords
Since 6/4/2026, landlords whose qualifying income is over £50,000 have had to keep digital records and send quarterly updates to HMRC. Qualifying income is the total gross rent plus any self employed turnover, before expenses. The threshold drops to £30,000 from 6/4/2027 and to £20,000 from 6/4/2028.
Two or three flats in Fulham or Chelsea can easily take you over these limits. If you own jointly, each owner looks at their own share. We check whether you are in scope, set up software that suits a landlord rather than a trading business, and can handle the quarterly updates and the final declaration for you.
Mistakes that cost landlords money
We see the same errors every year when new landlord clients send us their old returns.
- Claiming the full mortgage payment, including capital repayments, as an expense
- Treating a kitchen upgrade or extension as a repair
- Leaving out rent from a period when the property was let through a short stay platform
- Splitting income with a spouse in a way that does not match legal ownership
- Forgetting the costs of finding tenants, such as advertising and referencing
What to have ready
For each property, gather the annual statement from your letting agent if you use one, bank statements showing rent received, your mortgage interest statement for the tax year, and invoices for repairs, insurance and service charges. A note of any months the property was empty is also useful.
Send us an enquiry with the number of properties you own and how they are held. We review your situation for free and agree a fixed fee before any work starts. If you are thinking about growing your portfolio or moving it into a company, we can talk that through as a separate piece of advice.
Who this suits
- Accidental landlords letting a former home in Fulham or Sands End
- Owners of two or more buy to let flats
- Couples who own rental property jointly
- Landlords letting rooms or short stay accommodation
- Higher rate taxpayers hit hard by Section 24
Common questions
Do I need to tell HMRC about rental income?
Yes, unless your gross rental income is £1,000 or less and covered by the property allowance. Above that you need to tell HMRC. If your rental income is more than £2,500 after expenses, or more than £10,000 before expenses, you must report it on a self assessment tax return each year. If you have missed past years, it is better to put it right before HMRC contacts you.
Can I deduct my mortgage payments from rental income?
Not the full payment. Capital repayments are never deductible. For residential property held personally, the interest part gives you a basic rate tax credit rather than a deduction, under the Section 24 rules.
Is a new kitchen a repair or an improvement?
It depends on what it replaces. A like for like replacement of a worn kitchen is usually a repair. If the new kitchen is a clear upgrade or adds something that was not there before, part of the cost may be capital.
What happened to the furnished holiday lettings rules?
The special furnished holiday lettings regime was abolished from 6/4/2025. Short term lets are now taxed like other residential lettings, which changed the treatment of finance costs, capital allowances and some capital gains reliefs.
How is rental income split between married owners?
For property owned jointly by spouses or civil partners, HMRC normally treats the income as split 50:50. If you own it in unequal shares, you can elect for the income to follow actual ownership by sending a declaration to HMRC.
Do I need Making Tax Digital as a landlord?
You do from 6/4/2026 if your qualifying income from property and self employment is over £50,000. The threshold falls to £30,000 from 6/4/2027 and £20,000 from 6/4/2028. Landlords below the threshold carry on with the annual tax return for now.
I live abroad and let my Fulham flat. Can you help?
Yes. Landlords who live outside the UK have extra rules under the Non Resident Landlord Scheme. Our non resident landlord tax service covers this in detail.