Tax on Your Rental Profit
£3,746
an effective 31.2% rate, because it's taxed on top of your other income at your marginal rate
Illustrative only, using England/Wales/Northern Ireland Income Tax rates and thresholds for the 2025/26 tax year — Scotland has different bands. Excludes National Insurance, dividend tax, student loan repayments, and pension contributions, all of which change your actual take-home figure. Not tax advice — speak to an accountant before making decisions based on this.
What This Calculator Does
This calculator works out UK Income Tax for the 2025/26 tax year on your combined salary (or other employment, self-employment, or pension income) plus net rental profit from buy-to-let property, so you can see the true tax cost of adding rental income on top of what you already earn.
It applies the standard Personal Allowance, basic (20%), higher (40%), and additional (45%) rate bands, and — critically for higher earners — the Personal Allowance taper between £100,000 and £125,140, which creates an effective 60% marginal rate on that slice of income.
How the Calculation Works
Your Personal Allowance starts at £12,570 and is reduced by £1 for every £2 of total income above £100,000, reaching £0 at £125,140. Total Income Tax is then calculated on the standard bands: 20% up to £50,270, 40% up to £125,140, and 45% above that.
Because rental profit is added on top of your salary, it's taxed at whatever your marginal rate becomes once salary is accounted for — not in isolation. A basic-rate taxpayer whose rental profit pushes them into the higher-rate band pays 40% on the portion that spills over, not 20% on all of it.
The headline figure isolates the tax caused specifically by the rental profit, calculated as (tax on salary plus rental profit) minus (tax on salary alone) — the real cost of that income stacking on top of everything else you earn.
Worked Example
A landlord earning £45,000 in salary with £12,000 in net rental profit after expenses.
- Salary alone: £45,000 → tax = £6,486
- Combined income: £45,000 + £12,000 = £57,000
- Combined tax: £10,232 (basic-rate band exhausted at £50,270, remainder taxed at 40%)
- Tax caused by rental profit: £10,232 − £6,486 = £3,746
£3,746 of the total tax bill — an effective 31.2% rate on the rental profit itself — is directly attributable to the rental income, because most of it falls in the 40% higher-rate band once stacked on the salary.
Frequently Asked Questions
What income tax bands apply in 2025/26?
For England, Wales, and Northern Ireland (Scotland has its own bands), the tax-free Personal Allowance is £12,570. Above that, 20% applies up to £50,270, 40% from £50,270 to £125,140, and 45% above £125,140. These thresholds have been frozen since 2021 and remain frozen through the 2025/26 tax year, pulling more taxpayers into higher bands via fiscal drag as wages rise.
Why is my Personal Allowance being reduced?
If your total taxable income — including rental profit — exceeds £100,000, your £12,570 Personal Allowance is withdrawn at £1 for every £2 you earn above that threshold, reaching £0 once you hit £125,140. Because you're losing tax-free allowance and paying 40% tax on the income that replaces it, your effective marginal rate across that £25,140 band works out to 60%.
Does this calculator include National Insurance?
No. This tool calculates Income Tax only. Rental profit isn't subject to National Insurance at all, since it's investment income rather than earnings, but salary and self-employment income are — factor Class 1 or Class 4 NI in separately if you're estimating total take-home pay from employment or a sole-trader business alongside your rental portfolio.
Is rental profit taxed differently from salary?
No — for individual landlords, net rental profit is added to your other income and taxed through the same Income Tax bands, at whatever your marginal rate becomes once salary is accounted for first. The one major difference is mortgage interest: since Section 24, landlords can't deduct it before arriving at 'rental profit' — instead they get a flat 20% tax credit on interest paid. Use our Section 24 Tax Calculator to see that effect in detail.
What counts as 'net rental profit' for this calculator?
Rental income minus allowable expenses — letting agent fees, insurance, and maintenance and repairs. The 20% mortgage interest tax credit is applied separately by HMRC rather than deducted here. If you're unsure of your net figure, run your numbers through our Rental Yield Calculator first, or through the Section 24 Tax Calculator if you have mortgage debt on the property.