Property Tax Essentials for 2026

Property taxation directly impacts every landlord’s returns. In 2026, staying on top of income tax, allowable expenses, capital gains, and reporting obligations is essential for maintaining profitable, compliant portfolios and avoiding costly errors.

 

Income Tax on Rental Income

Rental income is taxable, combined with other sources such as employment or pensions to determine your overall tax band.

• From April 2027, rates are:

  • Basic: 22%

  • Higher: 42%

  • Additional: 47%

Calculate taxable income: Subtract allowable expenses from total rental receipts to determine net rental profit.

What counts as income:

• Monthly rent

• Fees for services you provide

• Charges for furniture/appliances

• Utility payments collected from tenants

 

Claim All Allowable Expenses

Reducing your tax liability requires claiming all legitimate expenses, including:

• Property maintenance and repairs

• Buildings & contents insurance

• Letting agent fees

• Legal, professional, and accountancy costs

• Safety certificates, inspections, and direct property costs

Mortgage interest: now provides a basic rate credit of 20%, affecting higher-rate taxpayers differently than before.

Important distinction:

• Repairs = allowable

• Improvements = not allowable

Examples: Fixing a broken boiler = repair; replacing a working boiler with a new model = improvement.

 

Capital Gains Tax on Property Disposal

When selling rental property:

• Subtract purchase price, acquisition costs (stamp duty, legal fees), and improvement costs from sale proceeds.

• Capital gains rates have increased since 2025: basic vs higher/additional rates apply.

• Keep detailed records of all improvements — without documentation, gains may be overstated.

 

Record-Keeping Requirements

Maintain comprehensive records for at least six years:

• Rental income & expenses: receipts, invoices, bank statements

• Tenancy agreements, deposit protection certificates

• Safety inspections, maintenance logs

• Correspondence with tenants or agents

Tip: Digital record-keeping via landlord-focused accounting software simplifies tracking, reporting, and HMRC compliance.

 

Reporting and Payment Deadlines

• Self-assessment tax returns are due by 31 January following the tax year end (5 April).

• Payments on account: 31 January during the tax year, 31 July following year.

• Balancing payments: next 31 January.

Register for self-assessment promptly if rental income exceeds thresholds. Late registration or missed reporting can incur penalties.

 

Limited Company Considerations

Landlords using limited companies face different rules:

• Corporation tax applies instead of income tax

• Ownership structure decisions impact tax efficiency, future profits, and long-term planning

Advice: Seek specialist guidance before switching between personal and company ownership — the costs and tax implications can outweigh benefits if done incorrectly.

 

Why Professional Advice Matters

For day-to-day property tax, allowable expenses, capital gains, and compliance, use a specialist accountant or tax adviser.

 

For legal documentation, contracts, or structural ownership advice, consult a solicitor.

 

Many landlords benefit from having both professionals working together to cover tax and legal obligations.

 

Staying informed on property taxation in 2026 is crucial for every landlord. Accurate records, understanding allowable expenses, timely reporting, and professional guidance protect your portfolio, maximise returns, and keep you fully compliant.