Yes, rental income from a buy-to-let property is subject to Income Tax.
Owning a buy-to-let property can be a great way to build income and long-term wealth, especially in a city like London where rental demand is high.
But with that income comes tax responsibility, and many landlords find themselves wondering: Do I need to pay income tax on my rental income? What about capital gains when I sell? Can I claim for repairs?
It’s understandable to feel confused by the tax side of letting.
The good news is that once you understand the basics and keep good records, it becomes much easier to manage.
Here, we break down what you need to know about income tax when it comes to buy-to-let properties.
And if you’re looking for some extra support, partnering with a trusted property management team like J Property Management can take a lot of that stress off your plate!
But before we get into it, just a disclaimer: Everything in this article has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax advice. We recommend consulting your own tax advisors to get advice on your personal situation.
Do You Pay Income Tax or Capital Gains on a Buy-to-Let?
You have to pay income tax on your buy-to-let income.
Essentially, if you rent out a property and make a profit, that profit is subject to income tax. The rate depends on your total income for the year, including what you earn from your job or any other things you do to earn money.
Here’s how it breaks down for the 2024/25 tax year:
- You do not pay any income tax on the first £12,570 you earn in total.
- Income between £12,571 and £50,270 is taxed at 20 percent.
- Income from £50,271 to £125,140 is taxed at 40 percent.
- Anything over £125,140 is taxed at 45 percent.
If the income from your rental pushes you into a higher tax bracket, you’ll pay more on the portion that goes above that threshold.
So even if you’re a basic rate taxpayer normally, rental income can bump you up.
Example: Say you work as a consultant earning £45,000 per year, but you also have a property that pays you £1,000 a month after fees. This means your total income for the year is £57,000. This puts you in the 40% tax bracket for the £6,730 you have earnt over £50,270.
When Does Capital Gains Tax Come Into Play?
Capital Gains Tax (CGT) comes into play when you sell the property for more than you bought it for. You’ll pay either 18 percent or 24 percent on the profit, depending on your income level.
If you’re in the higher rate bracket (over £50,270) you’ll pay 24%, but if you’re in the lower rate (below £50,270), you’ll pay 18%.
There is a small tax-free CGT allowance of £3,000, but that doesn’t go far in today’s property market.
Remember: You only pay tax on profits, so if you sell your property for the same or less than £3,000 more than you bought it for, then you won’t pay any capital gains tax.
Managing your portfolio in a smart way can help reduce the amount of tax you pay, and it’s worth getting professional advice if you’re thinking of selling.
Companies like J Property Management can connect you with trusted accountants or even help you plan your sales strategy if you’re managing multiple properties.
What Counts as Rental Income?
Rental income is more than just the monthly rent you get. It also includes:
- Any money you keep from deposits to cover repairs
- Fees you charge tenants for services like cleaning or utilities
- Non-refundable deposits or extras you collect as part of the tenancy
Even if you only let your property part-time or through a short-term rental platform, that income still counts and needs to be declared if it goes over certain limits.
You can earn up to £1,000 from property income without paying tax. This is called your property allowance, and if you stay under it, you don’t need to declare anything. But once you go over that figure (or if you want to deduct expenses) you’ll need to report it to HMRC through a Self Assessment tax return.
What Can You List As Taxable Expenses With A Buy-To-Let
The good news is that you only pay tax on the profit you make, not on the full amount you receive in rent. You can lower your taxable income by deducting certain allowable expenses.
However, you will need to prove that you have actually spent this money if asked – so it’s very important to keep receipts or any other documents!
These expenses include things like:
- Letting agent fees
- Council tax, if you pay it
- Buildings and contents insurance
- Maintenance and repairs (not improvements)
- Utility bills you pay on the tenant’s behalf
- Legal fees for tenancies under a year or lease renewals
- Accounting fees
- Advertising costs for finding new tenants
- Phone calls and stationery related to letting the property
It’s worth noting that you can’t deduct the cost of big renovations or upgrades, like a new kitchen or an extension. These are classed as capital expenses and could be used to reduce CGT when you sell, but not your yearly income tax bill.
A property manager like J Property Management can help you track these expenses properly and keep your finances organised, making tax time much less of a headache.
Can You Pay Yourself A Management Fee With A Buy-To-Let?
This is a question that comes up often. If you own the property personally (not through a limited company), you can’t pay yourself a management fee and deduct it as an expense. HMRC sees this as you moving money from one pocket to another, it’s not a genuine business cost.
However, if you operate your rental through a limited company, it is possible to pay yourself a salary or dividend, although that opens up another layer of tax and reporting responsibilities.
There’s no one-size-fits-all answer here, so if you’re thinking about switching to a company structure, it’s best to get advice before doing so.
J Property Management works with landlords to help you figure out what makes the most sense financially, especially if you’re scaling up or diversifying your portfolio.
National Insurance for Landlords: Do You Have To Pay?
Generally, landlords do not have to pay National Insurance contributions on rental income. But there are exceptions.
If being a landlord is your main job – for example, if you let out multiple properties and actively manage them – then you may have previously paid Class 2 National Insurance.
As of April 2025, however, these contributions are no longer needed under new rules in the Autumn Budget. This is good news for professional landlords, as it’s one less bill to worry about.
If you’re not sure about your employment status as a landlord, or whether you’re running a rental business versus just having investment properties, a specialist property manager can help clarify this. J Property Management offers advice and hands-on support for both accidental and full-time landlords.
Reporting and Payment Deadlines For Buy-To-Let Taxes
If you’re earning more than £2,500 from your property after expenses, you’ll need to file a Self Assessment tax return.
Here’s how the deadlines work:
- The tax year runs from 6 April to 5 April
- You must register for Self Assessment by 5 October following the tax year in which you received income
- Paper tax returns must be submitted by 31 October
- Online returns are due by 31 January of the following year
For example, if you earned rental income in the 2024/25 tax year, you’ll need to submit your online return by 31 January 2026.
Also worth knowing: from April 2026, landlords earning over £50,000 will need to comply with Making Tax Digital.
Those earning between £30,000 and £50,000 will follow in 2027. This means using software to keep digital records and send quarterly updates to HMRC. Another good reason to have a solid system in place, or better yet, a reliable team managing it all for you.
Landlord Taxes
Being a landlord can be great, but it also comes with responsibilities.
Knowing what income is taxable, what expenses you can claim, and when to report everything is important to avoiding surprises and staying on the right side of HMRC.
With recent changes to mortgage tax relief, National Insurance, and digital reporting rules, it’s more important than ever to stay informed and organised.
Whether you have one flat or a growing portfolio, getting your tax position right can save you thousands each year.
If all of this sounds like a lot to stay on top of, you’re not alone, and you don’t have to do it all yourself.
Need Help Managing Your Buy-to-Let?
From keeping track of expenses to handling tenant issues and maintenance, J Property Management is here to make being a landlord easier.
Based in London and trusted by local investors, their team offers expert property management services that can save you time, money, and stress.
Whether you need help with tax records or want full-service management, J Property is ready to support you every step of the way.
Get in touch with J Property Management today and take the stress out of buy-to-let.
