Declaring Rental Income on Your Self Assessment Return

Individuals receiving income from renting out property may need to report these earnings to HM Revenue and Customs (HMRC) through the Self Assessment system. This process requires taxpayers to declare their income and calculate the tax they owe. This guide clarifies when reporting is necessary, how to calculate taxable profit, what information is needed, and the submission process.

When You Must Report Rental Income

The need to report rental income depends on the gross amount received before deducting expenses. The £1,000 property income allowance provides a tax-free threshold, designed to simplify tax for those with minimal rental earnings. If your gross annual income is below this limit, you do not need to declare it unless you must file a tax return for other reasons.

Once gross rental income is between £1,000 and £2,500 per year, you must contact HMRC. They may be able to collect the tax owed by adjusting your PAYE tax code if you have employment income, which avoids the need for a full tax return.

A Self Assessment tax return is mandatory under several conditions. You must file if your gross rental income before expenses is £10,000 or more, or if your net rental income is between £2,500 and £9,999. You must also include all rental income on your return if you are already required to file for other reasons, such as being self-employed or having significant investment income.

Calculating Your Rental Profit or Loss

Total Rental Income

Your total rental income includes all payments received from tenants for the use of the property. This encompasses standard monthly rent and other payments specified in the tenancy agreement. For example, if you charge for services like cleaning of communal areas, gardening, or utilities, these amounts are part of your rental income. Any non-refundable deposits or funds retained from a tenancy deposit to cover property damage must also be included.

Allowable Expenses

After totaling your income, you can deduct allowable expenses, which are costs incurred “wholly and exclusively” for renting out the property. Common examples include:

• Letting agent and management fees
• Legal fees for lets of a year or less
• Buildings and contents insurance
• Service charges or ground rent
• Utility bills and Council Tax paid by the landlord
• Costs for services like cleaning or gardening

Distinguishing Repairs from Improvements

You must distinguish between repairs, which are allowable expenses, and capital improvements, which are not. A repair restores an asset to its previous condition, such as replacing broken roof tiles or fixing a faulty boiler. Redecorating a property between tenancies is also a repair. In contrast, a capital improvement enhances the property beyond its original state, such as building an extension. Improvement costs are not deductible from rental income but may be used in Capital Gains Tax calculations when the property is sold.

Mortgage Interest Relief

Landlords cannot deduct mortgage interest directly from rental income. Instead, you can claim a tax credit equivalent to 20% of your annual mortgage interest payments to reduce your final income tax liability. The relief is calculated as 20% of the lowest of three figures: your total finance costs, your property business profits, or your adjusted total income. This credit is capped at the 20% basic rate, meaning higher-rate taxpayers do not receive relief at their marginal tax rate.

Jointly Owned Property

For jointly owned properties, rental income and expenses are divided based on ownership share. For married couples or civil partners, the default split for tax purposes is 50/50, regardless of actual ownership. To have income taxed according to unequal shares, you must submit a Form 17, “Declaration of beneficial interests in joint property and income,” to HMRC. For joint owners who are not married or in a civil partnership, income is taxed based on their actual share of ownership.

Required Information for Your Tax Return

Record Keeping

Landlords are legally required to maintain accurate financial records to calculate profit and substantiate their tax return. You must keep documents showing all rental income, such as bank statements and tenancy agreements, along with invoices and receipts for all claimed expenses. HMRC requires these records to be kept for at least five years after the January 31st submission deadline for the relevant tax year.

Tax Return Forms

Declaring rental income requires completing specific forms. The main tax return is the SA100, and income from property is reported on the supplementary ‘Property’ pages, form SA105. If filing online, the system adds the property section for you. For a paper return, the SA105 form must be submitted alongside the SA100.

Completing the Property Pages (SA105)

On the SA105 form, you enter the financial details of your property business. You will input your total rental income and your total allowable expenses as a single figure, if your gross property income is below the £85,000 VAT threshold. A separate box is provided to report finance costs, such as mortgage interest, so the 20% tax credit can be calculated.

Submitting Your Self Assessment Return

First-Time Registration

Before filing a Self Assessment tax return for the first time, you must register with HMRC to get a Unique Taxpayer Reference (UTR). The UTR is a ten-digit number that identifies you within the tax system. For example, for income earned in the tax year ending 5 April 2025, the registration deadline is 5 October 2025. Registration can be completed online through the GOV.UK website.

Filing the Return

Filing your tax return is done through HMRC’s online portal. After logging into your account and navigating to the Self Assessment section, you will be guided through a series of questions. Indicating that you have income from UK property will add the necessary ‘Property’ pages to your return for you to complete.

Key Deadlines

To avoid penalties, you must adhere to the following submission and payment deadlines:

• File a paper tax return: Midnight, 31 October
• File an online tax return: Midnight, 31 January
• Pay the tax you owe: Midnight, 31 January

Paying Your Tax Bill

Once you have submitted your return and the tax liability is calculated, you must pay the amount due to HMRC. Several payment methods are available, including paying directly through your online tax account with a debit card, making a bank transfer, or setting up a direct debit. If you have employment income, it may be possible to have the tax collected through your PAYE tax code, provided the tax bill is below £3,000 and the online return is filed by December 30th.