Renting out your property

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Paying tax and National Insurance

When you rent out property you may have to pay tax. You can choose to pay voluntary National Insurance contributions to qualify for the State Pension or certain benefits. 

National Insurance

You may be eligible to pay voluntary Class 2 National Insurance contributions if you’re considered ‘gainfully employed’ for National Insurance purposes. For example if:

  • being a landlord is your main job
  • you rent out more than one property
  • you’re buying new properties to rent out

If you’re not sure if you count as ‘gainfully employed’, read paying voluntary Class 2 National Insurance contributions as a landlord.

If you are not eligible, you may be able to pay voluntary Class 3 National Insurance contributions instead. For example, if being a landlord is not your main job but you still: 

  • collect rent
  • arrange or carry out repairs
  • maintain common areas 
  • prepare properties between lets
  • advertise for tenants
  • arrange tenancy agreements

Property you personally own

The first £1,000 of your income from property rental is tax-free. This is your ‘property allowance’.

Contact HM Revenue and Customs (HMRC) if your income from property rental is more than £1,000 a year, up to £2,500.

You must report it on a Self Assessment tax return if it’s more than: 

  • £2,500 after allowable expenses 
  • £10,000 before allowable expenses

Register for Self Assessment

If you do not usually send a tax return, you need to register by 5 October following the tax year you had rental income.

Register now

Declaring unpaid tax

You can declare unpaid tax by telling HMRC about rental income from previous years. If you have to pay a penalty it’ll be lower than if HMRC find out about the income themselves.

You’ll be given a disclosure reference number. You then have 3 months to work out what you owe and pay it.

Do not include the £1,000 tax-free property allowance for any tax years before 2017 to 2018.

Property owned by a company

Count the rental income the same way as any other business income.

Costs you can claim to reduce tax

There are different tax rules for:

  • residential properties
  • furnished holiday lettings (rules ended April 2025)
  • commercial properties

Residential properties

You or your company must pay tax on the profit you make from renting out the property, after deductions for ‘allowable expenses’.

Allowable expenses are things you need to spend money on in the day-to-day running of the property, like:

  • letting agents’ fees
  • legal fees for lets of a year or less, or for renewing a lease for less than 50 years
  • accountants’ fees
  • buildings and contents insurance
  • maintenance and repairs to the property (but not improvements)
  • utility bills, like gas, water and electricity
  • rent, ground rent, service charges
  • Council Tax
  • services you pay for, like cleaning or gardening
  • other direct costs of letting the property, like phone calls, stationery and advertising

If you’re a company paying Corporation Tax, you can claim interest on property loans as an allowable expense. You cannot do this if you’re an individual landlord who pays Income Tax.

Allowable expenses do not include ‘capital expenditure’ - like buying a property or renovating it beyond repairs for wear and tear.

You may be able to claim tax relief on money spent on replacing a ‘domestic item’. This is called ‘replacement of domestic items relief’.

Domestic items include:

  • beds
  • sofas
  • curtains
  • carpets
  • fridges
  • crockery and cutlery

You must have only bought the domestic item for use by tenants in a residential property and the item you replaced must no longer be used in that property.

Furnished holiday lettings before April 2025

Furnished holiday lettings tax rules ended:

  • 1 April 2025 for Corporation Tax and Corporation Tax on chargeable gains
  • 6 April 2025 for Income Tax and Capital Gains Tax

If you submit a tax return for tax years up to and including April 2024 to 2025, you may be able to claim certain reliefs and allowances.

You may be able to claim Capital Gains Tax relief, including:

You may also be able to claim capital allowances, including writing down allowances, balancing allowances and charges. You must have added capital expenditure to a capital allowance pool by 5 April 2025. You can continue to claim on the pooled expenditure until it is used up or you make a small pool claim.

You may only be able to claim if all the following applied:

  • the property was offered to let as furnished holiday accommodation for at least 210 days a year
  • was let to the public as furnished holiday accommodation for at least 105 days a year
  • long lets (31 or more days in a row) did not total more than 155 days in a year
  • you charged the going rate for similar properties in the area (‘market value’) at that time

To help with tax returns up to and including the tax year April 2024 to 2025, you can use the capital allowances helpsheet and the furnished holiday lettings helpsheet.

Commercial properties

You can claim plant and machinery capital allowances on some items if you rent out a commercial property - like a shop, garage or lock-up.

Working out your profit

You work out the net profit or loss for all your property lettings (except furnished holiday lettings) as if it’s a single business. To do this, you:

  • add together all your rental income
  • add together all your allowable expenses
  • take the expenses away from the income

Work out the profit or loss from furnished holiday lettings separately from any other rental business to make sure you only claim these tax advantages for eligible properties.

Making a loss

Deduct any losses from your profit and enter the figure on your Self Assessment form.

You can offset your loss against:

  • future profits by carrying it forward to a later year
  • profits from other properties (if you have them)

You can only offset losses against future profits in the same business.

View a printable version of the whole guide

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