Renters' Rights Act 2025, Phase 1 commencement
Transition readiness pack
England

UK � HMRC � Income Tax � Capital Gains Tax � 2026/27

Landlord Tax Guide UK 2026, Section 24, CGT and Allowable Expenses

How UK landlords are taxed in 2026: Section 24 mortgage interest restriction, allowable expenses, capital gains tax on property disposal, the 60-day CGT reporting rule, SDLT surcharge, and limited company considerations.

14 min readUpdated 13 May 2026Last reviewed: 17 May 2026taxsection-24capital-gainsincome-tax

Income tax on rental profits

Rental profits (income minus allowable expenses) are added to your other income and taxed at your marginal rate: 20% (basic), 40% (higher), or 45% (additional). You must register for Self Assessment and file a tax return if your gross rental income exceeds �10,000 per year.

Section 24, mortgage interest restriction

Section 24 of the Finance (No.2) Act 2015 restricts mortgage interest relief for individual residential landlords to a 20% basic rate tax credit. Since 2020/21, the restriction is fully in force: you cannot deduct mortgage interest as an expense. Instead, you receive a 20% credit on the lower of your finance costs, rental profits, or adjusted total income. This significantly increases effective tax rates for higher-rate (40%) landlords.

Section 24 does not apply to companies

Limited companies holding residential property can still deduct mortgage interest in full against corporation tax (25%). This is the main driver of the trend towards company buy-to-let for new purchases.

Allowable expenses

  • Letting agent and management fees
  • Like-for-like repairs and maintenance (not improvements)
  • Buildings and contents insurance premiums
  • Ground rent and service charges (leasehold)
  • Council tax and utilities during void periods (if paid by landlord)
  • Accountancy and allowable legal fees
  • Replacement of domestic items (beds, sofas, appliances), not the initial purchase
  • Travel to inspect or manage the property (HMRC approved mileage rate)

Capital gains tax on disposal

Gains on residential property are taxed at 18% (basic rate) or 24% (higher/additional rate) after the �3,000 annual CGT exempt amount (2026/27). Report within 60 days of completion via HMRC's UK Property Account and pay the CGT on account. The gain is then included in your annual Self Assessment return.

SDLT surcharge on buy-to-let purchases

A 5% SDLT surcharge (increased from 3% in October 2024) applies to purchases of additional residential properties. The surcharge is added to each standard SDLT band. Check HMRC's SDLT calculator for the precise amount, the surcharge applies from the first pound of purchase price.

Limited company buy-to-let

  • Advantages: full mortgage interest deductibility; corporation tax (25%); retained profit reinvestment
  • Disadvantages: higher mortgage rates and fewer lenders; SDLT and CGT on transferring an existing portfolio; additional accounting costs
  • Best for: new purchases, not transferring existing portfolio
  • Always take specialist tax advice before incorporating

Templates recommended in this guide

Put this guide into practice, get the Periodic Assured Tenancy Agreement from the LetSafe shop, the regulation-current pack that matches this guide.

TenancyLS-E-001

Periodic Assured Tenancy Agreement

The new default English tenancy from 1 May 2026. Periodic from day one, with the prescribed written statement of terms built in. Ships with the Form 4A rent-increase notice template and an Information Sheet delivery acknowledgement form so a buying landlord has every Phase-1 compliance document in one pack.

£29
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TransitionLS-E-130

Renters' Rights Act Transition Pack

For landlords who need to migrate existing ASTs onto the new regime. The single most-searched landlord product of 2026.

£39
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Found a gap or disagree with something?

Reply to any LetSafe email or write to Richard@letsafeuk.co.uk. We rewrite guides when we get something wrong, the sooner we hear, the sooner we fix it.

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