What tax do property investors pay in the UK? It’s one of those questions that sounds simple but turns out to have a fair few moving parts — and getting any of them wrong can cost you money, either through overpaying or through a letter from HMRC you weren’t expecting.

How Income Tax Works on Rental Income

If you rent out a property in the UK, any profit you make counts as income. HMRC taxes it alongside your other income, which means it sits on top of whatever you already earn from employment, self-employment, or a pension. HMRC’s Property Income Manual covers how this works in detail, but the short version is this: your rental profit is your rental income minus your allowable expenses.

You declare this through a Self Assessment tax return each year, using the SA105 supplementary page for UK property income. The SA105 form was updated in April 2026, so if you’re filing for the 2025 to 2026 tax year, make sure you’re using the current version. The tax you pay depends on your total income for the year and which tax band you fall into.

What Expenses Can Property Investors Claim?

This is where most investors either leave money on the table or accidentally claim things they shouldn’t. Allowable expenses are costs that are wholly and exclusively for the purposes of the property rental business. That includes things like letting agent fees, accountancy fees, buildings insurance, repairs and maintenance, ground rent, and service charges.

Mortgage interest is a bit different. Since April 2020, individual landlords can no longer deduct mortgage interest as an expense in the usual way. Instead, you get a tax credit worth 20% of your mortgage interest costs, which is less generous if you’re a higher-rate taxpayer. This change caught a lot of landlords off guard when it was first introduced, and I still speak to people who haven’t adjusted how they’re calculating their profit.

Capital Gains Tax When You Sell a Property

When you sell an investment property and make a profit, you’ll likely owe Capital Gains Tax on the gain. The gain is roughly the difference between what you paid for it and what you sold it for, after deducting allowable costs like legal fees, estate agent fees, and any capital improvements you’ve made. Your annual CGT allowance has been reduced significantly in recent years, dropping to just £3,000 for the 2024/25 tax year onwards, so most property sales will produce a taxable gain.

The CGT rates for residential property are currently 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers, following changes in the October 2024 Budget. You must report and pay any CGT owed within 60 days of completing the sale, using HMRC’s online service. Missing that deadline means an automatic penalty, even if you’re not sure of the exact figure.

Why a General Accountant Often Isn’t Enough

I’ve spoken to lots of property investors who’ve been using the same accountant for years, only to realise their accountant has been treating the rental income like a side note rather than managing it actively. There’s a real difference between an accountant who files your return and one who looks at your full picture and flags things like the mortgage interest restriction, the benefit of cash basis accounting, or whether your structure makes sense for your plans.

HMRC’s Let Property Campaign, updated in April 2026, makes clear that landlords with undisclosed income need to come forward and that failure to do so can result in higher penalties or criminal prosecution. If you’ve ever had a year where your records were a bit rough, or you’re not confident everything has been declared correctly, the right accountant will help you sort it out without drama. The worst thing you can do is ignore it.