The property pages done properly: every allowable cost claimed, the finance cost reducer calculated rather than guessed, jointly held property split the way the legislation actually splits it, and the return filed through Making Tax Digital software where that now applies.
Landlords rarely get caught out by the rate. They get caught out by the fact that rent is taxed before the mortgage is paid. Since 6 April 2020 an individual letting residential property has had no deduction at all for finance costs. In its place comes a basic rate tax reducer, applied at Step 6 of the income tax calculation. The interest still leaves your bank account; it simply stops reducing your taxable profit.
Everything else follows from that. Gross rent inflates your total income, which can push you over the higher-rate threshold, over £100,000 where the personal allowance starts to taper, or over the High Income Child Benefit Charge threshold — on a portfolio whose real cash profit is modest. A return that is filled in accurately but not thought about will produce a correct number that costs more than it needed to.
This page sets out what actually goes on the property pages, in the order the legislation applies it.
Deductions
The general test is that a cost must be incurred wholly and exclusively for the property business. In practice that covers letting and management fees, insurance, ground rent and service charges, repairs and maintenance, council tax and utilities where the landlord pays them, legal and professional fees on letting, and accountancy.
ITTOIA 2005 s.311A has applied since 6 April 2016 for income tax. It covers moveable furniture, furnishings, household appliances and kitchenware. Three limits decide most claims:
£1,000, from 6 April 2017. Below it, rental income does not need to be reported at all. Above it, you may deduct £1,000 instead of your actual expenses. Two exclusions matter: it cannot be used against rent-a-room income, and it cannot be used in a year you claim the Section 24 finance cost tax reducer. For a mortgaged landlord that second point usually decides it.
The related relief for a room in your own home is separate. Rent a Room relief is £7,500 a year, halved to £3,750 where the income is shared with someone else. It applies to furnished accommodation in your own home, and it cannot be used for a home converted into separate flats.
Section 24
Individual landlords of residential property get a basic rate tax reducer instead of a deduction. It is 20% of the lowest of three figures:
Two consequences of that "lowest of" test are worth stating. The reduction cannot create a tax refund, so a loss-making year gives no cash back. And any unrelieved finance costs carry forward to a later year, which means the relief is deferred rather than lost.
ITTOIA 2005 ss.272A and 272B restrict the deduction and give the reducer for individuals. ITA 2007 ss.399A and 399B do the equivalent for partnerships. The restriction has been fully in force since 6 April 2020, phased in from 6 April 2017.
It does not catch everything. HMRC's Property Income Manual states that companies carrying on a property business are not affected, and that loans wholly for commercial properties are not affected either. The restriction bites on residential letting by individuals, trustees of accumulating or discretionary trusts, and personal representatives. Furnished holiday lettings were outside it only up to 5 April 2025 and are now inside it.
Illustrative only, on 2026/27 rates, England. A landlord has employment income of £45,000. The rental business produces £30,000 of rent with £6,000 of allowable costs other than finance, so property business profit is £24,000. Mortgage interest is £9,000.
Total income is £69,000. After the £12,570 personal allowance, taxable income is £56,430. The first £37,700 is taxed at 20% (£7,540) and the remaining £18,730 at 40% (£7,492), giving £15,032 before the reducer.
The reducer is 20% of the lowest of: finance costs £9,000; property profits £24,000; adjusted total income above the personal allowance £56,430. The lowest is £9,000, so the reducer is £1,800. Tax payable: £13,232.
Under the pre-2017 deduction the same landlord would have had property profit of £15,000, total income of £60,000 and tax of £11,432. The restriction therefore costs £1,800 a year here — the whole £9,000 of interest sat in the higher-rate band, so 40% relief was replaced by 20%.
Run your own numbers, including the threshold effects the restriction creates, with the Section 24 calculator, or read the Section 24 guide for the mechanism in full.
Joint ownership
Property held jointly by spouses or civil partners has its income taxed 50:50 by default under s.836 ITA 2007, regardless of the actual beneficial shares. That default is often the wrong answer where one spouse is a higher-rate taxpayer and the other is not.
The override is a Form 17 declaration under s.837 ITA 2007, and every condition on it is a place people fail:
Unmarried joint owners are in a different position again: they are taxed on their actual beneficial shares, and Form 17 does not apply to them.
Rates and dates
For 2026/27 the personal allowance is £12,570, tapering by £1 for every £2 of income above £100,000. The basic rate runs to £37,700 of taxable income, the higher rate from £37,701 to £125,140, and the additional rate above that. Those thresholds are frozen to 5 April 2031, so rising rents push landlords up the scale every year without any rate changing.
Payments fall on 31 January and 31 July, each payment on account normally half the previous year's liability, with the balancing payment on 31 January.
From 6 April 2027, property income has its own income tax rates in England, Wales and Northern Ireland: 22%, 42% and 47%. That is exactly two percentage points above the general rates at every step. The Section 24 reducer moves to the property basic rate of 22% at the same time.
Illustrative only, taking the calculation above forward. The reducer on £9,000 of interest rises from £1,800 to £1,980, which is £180 better. But every pound of the £24,000 property profit is taxed two points higher, which is £480 more. Net effect on the same facts: about £300 a year worse. The reducer rise is a real offset and a small one.
Jurisdiction. Scotland sets its own income tax rates and bands and has six of them, so a Scottish taxpayer's calculation differs from the figures above. The separate property income rates from 6 April 2027 cover England, Wales and Northern Ireland, applying in Wales through the Welsh rates of income tax. A Scottish taxpayer's property income stays on the Scottish rates. The Finance Act 2026 will also let the Scottish Parliament and the Senedd set their own property income rates, from a date the Treasury has not yet appointed.
Rent, allowable costs, replacement of domestic items, the finance cost reducer and any losses brought forward, prepared from records rather than reconstructed from a bank statement.
The lowest of the three figures identified properly, unrelieved finance costs carried forward and tracked, and the threshold effects on your wider tax position named.
Section 24 calculatorThe default 50:50 position checked against the actual beneficial interests, and Form 17 prepared and filed inside the 60 days where the facts genuinely support it.
The return submitted through Making Tax Digital software, with the quarterly updates behind it already correct.
Making Tax DigitalThe 31 January and 31 July figures known in advance, with a reduction claimed where income has genuinely fallen rather than left to run at last year's level.
Whether the April 2027 property rates change the case for holding property personally — with the cost of getting out shown, not skated over.
IncorporationThe return is the last step, not the first. What makes it accurate is the bookkeeping behind it, and what makes it cheap is having decided the joint ownership position, the expense treatment and the structure before the year ends rather than after. If you sold during the year, the gain has its own 60-day deadline as well as a place on the return — see capital gains tax on property. If the portfolio is held in a company, the return is a different animal entirely: see property company accounts.
Further reading: what you can actually claim and the landlord tax calendar.
Costs incurred wholly and exclusively for the property business: letting agent fees, insurance, ground rent and service charges, repairs and maintenance, council tax and utilities where you pay them, accountancy, and the replacement of domestic items. Finance costs are the exception and are not a deduction at all — mortgage interest on residential letting attracts a basic rate tax reducer instead, under sections 272A and 272B of ITTOIA 2005. There is also a property income allowance of £1,000. Below that, rental income does not need to be reported; above it, you may deduct £1,000 instead of your actual expenses, but you cannot use it in a year you claim the finance cost tax reducer.
You are taxed on rent before finance costs, then given a tax reduction of 20% of the lowest of three figures: the finance costs not deducted plus any brought forward, your property business profits for the year, and your adjusted total income above the personal allowance. Because the rent is taxed gross, a higher-rate landlord is charged 40% on income that funds a mortgage and gets 20% of the interest back. The reduction cannot create a tax refund, and anything unrelieved carries forward. The statutory basis is sections 272A and 272B of ITTOIA 2005, with sections 399A and 399B of ITA 2007 for partnerships. From 6 April 2027 the reducer is given at the new property basic rate of 22%.
Between spouses and civil partners it is 50:50 by default under section 836 of ITA 2007, whatever the actual ownership shares are. The only way to change that is a Form 17 declaration under section 837, and it is narrower than most people expect. It must be made jointly, so one spouse refusing ends it. It must reflect genuinely unequal beneficial interests, so it cannot move income to the lower earner without moving the ownership. It must reach HMRC within 60 days of the date of the declaration, and there is no power to extend that. And it covers only income arising after the declaration date.
For a replacement of a moveable item, yes. Replacement of domestic items relief under section 311A of ITTOIA 2005 has applied since 6 April 2016 and covers moveable furniture, furnishings, household appliances and kitchenware. Two limits matter. It is a replacement relief, so the first time you furnish a property there is nothing to claim under it. And it excludes fixtures — baths, toilets, fitted furniture and boilers are outside it, so a new bathroom is a different question entirely. Where the new item is an improvement rather than like-for-like, relief is capped at what a like-for-like replacement would have cost.
The balancing payment for a tax year falls on 31 January after the end of that year, and Making Tax Digital does not change that date. Payments on account fall on 31 January and 31 July, each normally half of the previous year's liability, so the January payment carries the balance for the year just filed plus the first instalment for the year in progress. For a landlord whose income has risen, and gross rent taxed before finance costs rises faster than real profit does, the January bill is always chasing a bigger number than July anticipated. Reserving monthly against the real marginal rate is the only comfortable version of this.
From 6 April 2027 property income gets its own income tax rates: 22% basic, 42% higher and 47% additional — exactly two percentage points above the rates on earned income at every step. The measure covers England, Wales and Northern Ireland, and the stated rationale is that property, savings and dividend income bear no National Insurance. The Section 24 finance cost reducer moves to the property basic rate of 22% at the same time, which gives back a fraction of it. The rates are set by the Finance Act 2026. In Wales they apply through the Welsh rates of income tax; a Scottish taxpayer's property income stays on the Scottish rates. Companies are not mentioned in the measure at all.
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