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UK Rental Income

Mark Twain

"Buy land. They’re not making it any more."

What rents are liable to UK tax

The UK tax system taxes -

    •  rents arising from UK property, wherever the owner is tax resident

    •  rental income arising anywhere in the world when owned by a UK tax resident person

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Will tax be deducted from my rent income?

If you are living outside the UK and you receive rents from a UK property then your letting agent may deduct tax from the rent received. If you are UK tax resident then you can receive your rents without deduction of tax.

For overseas landlords, your rental agent can usually arrange with the HMRC to have rents paid without deduction of tax.

If tax is deducted at source by a rental agent, you will still need to disclose the rental profits on your self assessment tax return. Tax deduction at source is not an alternative to filing a self assessment tax return.

How do I pay tax on rent income?

All tax due in respect of rents will be paid under the self assessment system. See our page on Self Assessment for full details.

You will need to complete the Land and Property supplement of your self assessment tax return.

What happens if I make a loss?

If you make a loss on your rental business, you can carry the loss forward to subsequent years and set it against future rental profits. If you have more than one property the loss will be aggregated with any other rental profits in the same year.

There are special rules for furnished holiday lettings (see below) but these rules are due to be withdrawn from April 2025.

What happens if I rent a room in my home?

HMRC have devised a special scheme for people who let a room in their home, called the Rent a Room Scheme. Under this scheme you will not be taxed on your first £7,500 of income from letting furnished accommodation in your only or main home.

There are various rules relating to the Rent a Room Scheme and these are on the HMRC website at the link below :


How is the tax liability on rent income calculated?

From gross rents received you can deduct certain expenses to arrive at a net profit. This net profit is then charged to tax.

The rules for calculating the allowable expenses are complex but generally, the net profit is taxed as if it were a business. A summary of the allowable expenses is shown below.

    •  Business rates, Council Tax, water rates, ground rates and insurance

    •  Repairs that prevent the property from deteriorating

    •  Finance charges including mortgage interest

    •  Management fees relating to the ongoing costs of letting

    •  Professional fees in drawing up accounts

    •  The cost of providing services e.g. gardening or cleaning

    •  Any expenses incurred wholly and exclusively for the purpose of your rental business e.g. advertising for tenants, stationery and telephone calls.

Landlords can no longer deduct all finance costs from their property income to arrive at the taxable profit. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

What are furnished holiday lettings?

There are special tax rules for rental income from properties that qualify as Furnished Holiday Lettings (FHLs) These rules are due to be withdrawn from April 2025 and transitional rules apply from March 6, 2024.

If you let a property that qualifies as an FHL :

    •  you can claim preferential capital gains tax treatment

    •  you can claim capital allowances for furniture, equipment and fixtures

    •  the profits count as earnings for pension purposes

The profit or loss from FHLs is calculated separately from any other rental business.

All your FHLs in the UK are taxed as a single UK FHL business and all FHLs in other EEA states are taxed as a single EEA FHL business.

Separate records must be kept for each FHL business.

To qualify as an FHL the property must be -

    •  in the UK or in the European Economic Area

    •  furnished

Accommodation can only qualify as a FHL if it is commercially let and it passes all three occupancy conditions.

The availability condition

The property must be available for letting as furnished holiday accommodation for at least 210 days in the tax year. The let period does not include any days when you are staying in the property. Special conditions applied during the Covid-19 pandemic.

The pattern of occupation condition

Long term letting will affect FHL status. If the total of all lettings that exceed 31 continuous days is more than 155 days during the tax year the property will not be an FHL for that year.

The letting condition

The property must be let commercially as furnished holiday accommodation to the public for at least 105 days in the year. Days when you let the property to friends or relatives at reduced rates is not a commercial let.

There is more information on the HMRC website at the link below :