Tax in the United Kingdom
See what the United Kingdom's tax rules do to your property portfolio.
What Freeholt models for property, income and retirement in the United Kingdom, and what it does not.
Free to start. No card. Rules reviewed 24 August 2026.
Modelled here
- Tax on rental income
- Capital gains on a sale
- Duty on purchase (approximate)
- Income tax beyond the rent
- Dividends, interest and share sales
- Retirement savings
- Inheritance and what happens on death
GBP · Rates as at 24 August 2026 · Rates editable in Settings · Estimates, not advice
Rental profit is taxed at the landlord's income tax rate (20/40/45%), but mortgage interest only earns a 20% tax credit (Section 24). Non residents pay the same tax on their UK property profit through Self Assessment; the 20% a letting agent or tenant deducts under the Non Resident Landlord Scheme is a payment on account of that bill, not the bill.
How rental income is taxed in the United Kingdom
For a resident owner: Progressive rates from 20% to 45%, stacked on other income in this country. The top rate of 45% applies above £125,140. For an owner living abroad and renting this out: Progressive rates from 20% to 45%, stacked on other income in this country. The top rate of 45% applies above £125,140.
Interest and losses
Mortgage interest is not deducted from the rent. Instead it earns a tax credit at 20%, which costs a higher rate taxpayer more than a deduction would. A rental loss is ring fenced: it carries forward against future rental income rather than reducing other income now.
Capital gains on a sale
Gains are added to income and taxed at the marginal income rate. Each owner has a tax free allowance of £3,000 a year against gains.
Annual property tax while holding
An annual property or land tax is not modelled here, which is not the same as there being none. Treat holding costs on this page as excluding it.
What it costs to buy
Purchase duty here is more than a single rate, and Freeholt prices the published rules rather than an average. For a foreign buyer Freeholt adds 2% on top, as a single figure standing in for a rule that is not a single rate. Stamp Duty Land Tax applies, with a 5% additional property surcharge plus a further 2% for non UK resident buyers.
What is Section 24, and what did it cost landlords?
Since the finance cost restriction was phased in, an individual landlord cannot deduct mortgage interest from rental profit. Instead the interest earns a flat 20% tax credit against the bill. A basic rate taxpayer is left roughly where they were. A higher rate taxpayer pays tax on rent that went straight to the lender, and enough of it can push total income into a higher band. Freeholt applies the credit exactly as the rule works, per owner, per year, and will also model the pre Section 24 full deduction as a what if, so the change is priced precisely for each landlord.
Buy to let in a limited company: what changes?
This is the question Section 24 created, because a company still deducts its interest in full. Against that sit corporation tax on the profit, tax again on the way out as dividends or salary, higher borrowing costs, and stamp duty and capital gains tax on any transfer of property already held. Freeholt compares holding in the owner's own name, jointly, or through a company or a trust, and shows what each one keeps after tax, year by year. It compares. It does not recommend, and it is not a substitute for an accountant who knows the landlord's position.
Does Freeholt do Making Tax Digital?
No, and it is worth being plain about it. Freeholt is a planning tool: it models what a decision does to a household's tax and income over decades. It does not file. Quarterly submissions belong to an accountant or to bookkeeping software built for filing, and most landlords who plan here will keep using one of those alongside. The two jobs are different and we would rather say so than blur it.
Income tax in the United Kingdom, beyond the rent
Progressive, up to 45%. The bands run Up to 12,570 at 0%; 12,570 to 50,270 at 20%; 50,270 to 125,140 at 40%; Above 125,140 at 45%. Rental profit joins this ladder. Figures in GBP, as verified 29 August 2026.
Dividends, interest and share sales
How the United Kingdom taxes investment income. For dividends: Own rate ladder: 0% / 10.75% / 35.75% / 39.35%. First 500 tax free each year. For interest: Own rate ladder: 0% / 20% / 40% / 45%. Up to 1,000 tax free, depending on the income band. For share sale gains: Own rate ladder: 18% / 24%. First 3,000 tax free each year. Tax free accounts worth knowing about: ISA. Up to 20,000 a year can be paid into ISA. That is a limit on what goes IN, not an allowance against the tax. A capital loss is set against gains before any discount or allowance, and anything left over carries forward to later years. A carried forward loss is only used down to the annual exempt amount, never below it, so the exemption is not burnt. It relieves capital gains only, never other income.
Pensions and retirement savings
EET. Deductible in, taxed out. Contributions come off taxable income. Capped at 60,000 a year. Growth inside the fund is untaxed. Withdrawals can start from age 55. 25% can be taken tax free, up to 268,275. The rest is taxed as income.
Inheritance and what happens on death in the United Kingdom
Charged on the estate as a whole, before anyone inherits, at up to 40%. The charge falls on the estate itself and is settled before anyone inherits, so what each beneficiary receives is what is left after it. The 40% is not a worst case that a closer relative escapes. This country charges one rate whatever the relationship, so a child inheriting is charged the same 40% as somebody unrelated, and what softens a bill here is the allowances and exemptions that apply rather than a lower rate. Anything passing to a spouse is exempt without limit while they are long term resident here; if they are not, only the first 325,000 is. These rules were verified 5 August 2026. Freeholt models the country's rules rather than any particular will, so what an estate pays still depends on who inherits and what is in it.
Worth knowing about tax in the United Kingdom
The £500 dividend allowance is per person per tax year, and it occupies band space rather than being deducted, so the taxed part of a dividend stacks on top of it. UK dividend rates rose 2 percentage points on 6 April 2026, and the newer ones are what is charged here. These are the rates for gains on shares and other chargeable assets. UK property gains follow a separate model with its own rates and reliefs.
How Freeholt models the United Kingdom
Every rate above is priced from Freeholt's own table for the United Kingdom and runs through the whole projection: rental income, a modelled sale and the annual holding costs all use the same figures. They are also defaults that can be edited in Settings, so a position that differs, or a rate that changes before we catch it, can be corrected and the projection reprices around it.
What running this property costs
In the UK this covers letting/management agent fees, buildings insurance, maintenance, and (for flats) service charge and ground rent. Council tax and utilities are usually the tenant's.
How borrowing works here
Buy to let is commonly interest only over a 25 year term, with the rate fixed for a shorter 2 to 5 years.
What actually happened here
This country's own record, one year at a time. Nothing on this page is borrowed from another country. Move across a chart to read a year.
Recent rule changes in the United Kingdom
- 2027-04-06 Autumn Budget 2025: property income rates rise 2pp to 22/42/47% from 6 Apr 2027 (COMPUTED from 2028 projection years; 20/40/45 applies through 2026 to 27). A High Value Council Tax Surcharge on £2m+ homes is due April 2028.
What Freeholt models here
- ModelledTax on rental income
- Resident and non resident rates, with interest and losses treated under the local rule.
- ModelledCapital gains on a sale
- Priced in the year of the sale under the rules of that year.
- ApproximateDuty on purchase
- The published scale is priced. The foreign buyer surcharge is carried as one figure, where the real charge follows a rule that is not a single rate.
- Not yetAnnual property or land tax
- Not priced here; the page says where the charge falls instead.
- ModelledIncome tax beyond the rent
- Salary and other income, stacked with the rent.
- ModelledDividends, interest and share sales
- Investment income and gains, with the local allowances.
- ModelledRetirement savings
- Contributions, the fund and the way out.
- ModelledInheritance and what happens on death
- Who pays, and on what, when property passes on.
What Freeholt does not model here
- Any annual property or land tax, which may still exist here
- Treaty relief between this country and the owner's country of residence
What the figures above leave out (14)
- Employee National Insurance contributions (NIC) are not included: 8% of earnings between the primary threshold and the upper earnings limit, and 2% above that. This is income tax alone, so for an employee the total taken from pay is understated by that much.
- From 6 April 2027 UK rental income takes its own 22/42/47% rates and stops sharing this ladder. Stacking rent onto salary after that date understates it by 2 percentage points in every band.
- A UK non resident is charged the same 20/40/45% ladder as a resident, which is the law; what differs is collection. The Non resident Landlord Scheme's deduction at source, PAYE withholding and the treaty tie breaker for where the taxpayer is resident are not modelled; they change when tax is paid, not what is owed. The personal allowance is also given to every non resident here, and not every non resident is entitled to it, so one who does not qualify is understated by the tax on £12,570.
- No investor specific reliefs are applied: Enterprise Investment Scheme (EIS), Seed EIS and Venture Capital Trust relief, Business Asset Disposal Relief, employee share scheme treatment and the exemption for gains on gilts are all left out. Each one lowers the bill, so where any applies the tax shown is overstated.
- The personal allowance taper above £100,000 is not applied to investment income here.
- The Personal Savings Allowance is applied: £1,000 of interest at 0% for a basic rate taxpayer, £500 for a higher rate one and nothing at the additional rate, with the band chosen on total income including the interest itself. It is charged at nil but still uses up band space, as HMRC does it. Priced one receipt at a time, interest from another account this figure cannot see could drop the taxpayer to a smaller allowance, so on a single receipt the tax can only be understated, never overstated.
- The starting rate for savings, which gives up to £5,000 of interest at 0% to someone whose other income is little more than the personal allowance and shrinks as that income rises, is not applied. A low income saver is overstated here, by up to the tax on £5,000 of interest.
- The £60,000 annual allowance is not tapered. Once threshold income is over £200,000 and adjusted income over £260,000, the allowance falls by £1 for every £2 above £260,000, down to a floor of £10,000 at £360,000. So on £300,000 the real allowance is £40,000, not the £60,000 shown, and a high earner's contribution can be over the limit without being flagged.
- Once money has been flexibly taken from a defined contribution pension, the money purchase annual allowance (MPAA) cuts the allowance to £10,000 for that year and every year after, irreversibly. That is not modelled: where the MPAA applies the £60,000 shown is £50,000 too high, and a contribution over £10,000 would not be flagged.
- Unused annual allowance from up to three earlier tax years can be carried forward to lift this year's £60,000, and that carry forward is not modelled. For anyone with unused allowance, the real limit is higher and a contribution shown here as over the cap may in fact be within it.
- Tax relief on an individual's own contributions is limited to 100% of relevant UK earnings (or £3,600 gross if that is higher), and pension income does not count as earnings. That second limit is not applied; only the £60,000 annual allowance is. So for anyone contributing more than they earn, or retired, the relief shown is overstated and the excess would get none.
- Relief at source, net pay and salary sacrifice are all priced as the same full marginal rate relief, which is right for income tax. Salary sacrifice also saves National Insurance and the other two do not; that saving is not modelled, so for salary sacrifice the benefit shown is understated. From 6 April 2029 only the first £2,000 a year sacrificed escapes National Insurance.
- Scottish rates are not told apart from the rest of the UK's. Pension income is taxed on the Scottish scale for a Scottish taxpayer.
- Only a defined contribution pot is modelled. A defined benefit pension is a promise of income rather than a pot, and its three multipliers (16 times for the annual allowance, 20 times for the tax free lump sum, and the scheme's own commutation factor) are not interchangeable and none of them is a balance. For a defined benefit member these figures describe a different kind of pension, and no direction of error can be given.
Coverage deepens country by country. Every figure is an estimate, not advice.
Compare with another country
Each page is built from the same table the app runs on, so the figures line up side by side.
Compare the United Kingdom with another country — rent, gains, annual tax and duty, side by side.
Questions people ask
- Does Freeholt model United Kingdom property tax?
- Yes. Rental income tax, capital gains on a sale and duty on purchase are priced from Freeholt's own rate table for the United Kingdom. Duty on purchase carries a simplification that the page names beside the figure. Annual property or land tax is not priced here, and the page says so rather than showing a zero. Any rate or threshold can be corrected in Settings so the whole projection reprices. Every figure is an estimate, not advice.
- How is rental income from the United Kingdom taxed if I live somewhere else?
- Progressive rates from 20% to 45%, stacked on other income in this country. The top rate of 45% applies above £125,140. Tax may also be due in the country of residence, with credit for what was paid here. Estimates only, not advice.
- What are the United Kingdom figures as at?
- The rate table for the United Kingdom was last reviewed on 24 August 2026. Freeholt date stamps every country rather than implying all of them were checked on the same day. Estimates only, not advice.
- Does Freeholt model Section 24?
- Yes. Mortgage interest earns the 20% credit rather than a deduction, applied per owner and per year, and the pre Section 24 treatment is available as a comparison that shows what it costs. Figures are estimates, not advice.
- Can I compare owning personally against a limited company?
- Yes. The ownership comparison puts the owner's own name, joint ownership, a company and a trust side by side after tax. It shows the arithmetic; the decision and the paperwork belong to the owner and their accountant. It is a calculator, not advice.
- Are the capital gains tax rates on residential property included?
- Yes. The banded 18% and 24% residential rates, the £3,000 annual exempt amount, selling costs and the loan payout are all priced into the year the sale is modelled. Estimates only, not advice.
- Does it handle a portfolio, or only one property?
- A portfolio. There is no cap on properties, loans or pensions on the free plan, each keeps its own currency and its own country's rules, and they roll up to one net worth and one income figure. Figures are estimates, not advice.
- What does it not model?
- Two known simplifications, stated rather than hidden: Scottish income tax rates are not distinguished from the rest of the UK, and the personal allowance taper above £100,000 is not applied to investment income (it IS applied to salary, pension and rental income, where £1 of allowance goes for every £2 of income over that, so a landlord earning into that stretch sees the real 60% marginal rate rather than 40%). Both are flagged in the app where they bite. Estimates, not advice.
Model a property in the United Kingdom alongside everything else you own: see the year your portfolio starts paying you back.