How is rental income from property taxed in the UK?
Answered 11 March 2026
How is Rental Income from Property Taxed in the UK?
What the law says
Definition of a UK Property Business A person's UK property business consists of every business which the person carries on for generating income from land in the United Kingdom, and every transaction which the person enters into for that purpose otherwise than in the course of such a business. The charge to income tax for individuals arises under Part 3 of ITTOIA 2005.
For corporation tax payers, the equivalent provision is section 205 of CTA 2009.
Losses Losses of a UK property business are calculated on the same basis as profits, by virtue of sections 272 and 272ZA of ITTOIA 2005.
Finance costs restriction The balance of finance costs (e.g. mortgage interest) which would otherwise qualify for relief but which, because of the restriction, has not been deducted in arriving at taxable rental profits, may be relieved at the basic rate of tax and deducted from the tax liability for the year. This is covered in sections 274A and 274AA of ITTOIA 2005.
HMRC guidance / practice
Basis of assessment Taxable rental profits are calculated for the tax year running from 6 April to the following 5 April.
Cash basis (default for individuals) The cash basis is used by default for all UK resident individuals where gross property income in the tax year is £150,000 or less. It taxes actual receipts and expenses during the tax year. Accrued but unpaid rent is not counted, meaning bad debt relief is achieved automatically. Where gross property income does not exceed £150,000, the landlord may elect to use the accruals/GAAP basis instead.
Accruals/GAAP basis The accruals basis applies where gross rental income exceeds £150,000, or where the taxpayer has elected it. It must also be used if the landlord is a company, an LLP, a mixed partnership (where at least one partner is not an individual), or a trustee. Under this basis, income and expenditure are matched to the period to which they relate, regardless of whether amounts have actually been received or paid.
Allowable deductions Salaries and wages paid to employees engaged in managing the property business are allowable deductions. A landlord cannot deduct anything for their own time spent in the business, but can deduct wages paid to a spouse, civil partner or other relations provided the amounts represent proper commercial reward.
Non-UK resident companies If a non-UK resident company owns UK property (not connected with a UK permanent establishment), the rent is chargeable to income tax under ITTOIA 2005, Part 3, Chapter 3. From 6 April 2019, gains on disposals of UK land by non-residents are also chargeable to UK tax.
UK REITs Where property is held through a UK Real Estate Investment Trust (REIT), the REIT's rental income is exempt from corporation tax. The REIT must distribute 90% of its tax-exempt rental profits as Property Income Distributions (PIDs), paid under deduction of basic rate income tax. These PIDs are taxed as UK property income in the hands of the investor.
Citation sources
Part 12 of the Corporation Tax Act 2010 provides for a special tax regime for ‘Real Estate Investment Trusts’ (UK-REITs). A UK-REIT is either a company or group that carries on a property rental business, and meets a number of conditions. The Real Estate Investment Trust Manual (GREIT) explains the taxation of UK-REITs in detail. This section of the Savings and Investment Manual explains the tax treatment of the investor. Broadly, the special tax regime is available to companies or groups whose
Part 4 Loss relief Chapter 1 Introduction Overview of Part 59 1 This Part provides for income tax relief for— a losses in a trade, profession or vocation (and certain post-cessation payments and events) (see Chapters 2 and 3), b losses in a UK property business or overseas property business (and, in the case of a UK property business, certain post-cessation payments and events) (see Chapter 4), c losses in an employment or office (see Chapter 5), d losses on a disposal of certain shares (see Cha
'UK property business' includes all activity for generating income from land in the UK. See section 264 of the Income Tax (Trading and Other Income) Act 2005 (for taxpayers in charge to income tax (IT)) and section 205 of the Corporation Tax Act 2009 (for taxpayers in charge to corporation tax (CT)). A UK taxpayer may also have an overseas property business – see PIM1025.
Part 3 Property income Chapter 2 Property businesses Basic meaning of UK and overseas property business UK property business 264 A person's UK property business consists of— a every business which the person carries on for generating income from land in the United Kingdom, and b every transaction which the person enters into for that purpose otherwise than in the course of such a business.
For individuals (including partners in a property rental partnership) the balance of finance costs which would otherwise qualify for relief but which because of the restriction has not been deducted in arriving at taxable rental profits, may be relieved at the basic rate of tax and deducted from tax liability for the tax year in question. This is covered in sections 274A and 274AA of ITTOIA05. To arrive at the actual amount of relief to be deducted, the individual may need to carry out calculati
Salaries and wages that a landlord pays to employees engaged full time or part time on managing the land or property within their property business are allowable. This includes any normal pension contributions they may pay for their employees. But unusual or lump sum pension contributions may not be allowable. A deduction can’t be claimed for salaries and wages that were not paid during the tax year unless they were paid within nine months after the end of it. This is a special rule that only ap
l apply if the gross rental income exceeds £150,000, or (where the profits are lower) if the taxpayer has elected it. The accruals basis must also be used if the landlord is a company, an LLP, a mixed partnership (where at least one partner is not an individual), or a trustee. The accruals basis taxes the income accruing (and the expenses incurred) during the tax year, irrespective of whether the actual amounts have been collected or paid over. The income and expenditure are, thus, matched to th
Part 12 Real Estate Investment Trusts Chapter 1 Introduction Key concepts “ UK property rental business” of non-UK companies 520 1 In this Part references to “ UK property rental business ”, in relation to a non-UK company, are to the company's property rental business in the United Kingdom. 2 Subsection (3) applies if— a a non-UK company which is a member of a group UK REIT has UK property rental business, and b the profits of that business would be chargeable to income tax under Chapter 3 of P
ve their meaning from their context. A phrase or passage must be read in the context of the section as a whole, and in the wider context of a relevant group of sections. Other provisions in a statute - and the statute as a whole - may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are, therefore, the primary source by which meaning is ascertained. Explanatory Notes - prepared under the authority of Parl
If a non-UK resident company owns UK property, unless it is effectively connected with a trade carried on through a UK permanent establishment, the rent is chargeable to income tax under ITTOIA2005/Part 3/Chapter 3. The gains on such property, disposed of before 6 April 2019, would not normally be chargeable to capital gains tax, being owned by a non-resident. From 6 April 2019 gains on disposals of UK land by non-residents are chargeable to UK tax. By a rather circuitous route, the income from