Rental Income After Tax
Knowing your gross rent is only half the picture. After deducting allowable expenses, accounting for the Section 24 restriction, and paying income tax at your marginal rate, your actual take-home figure can look very different. This calculator gives you the net income you actually keep from your rental property — the number that matters when evaluating whether a property is genuinely profitable.
Why this matters
Investors who only look at gross rent or gross yield consistently overestimate returns. After-tax income is the real measure of whether a property is worth holding.
Key points
- Net rental income = gross rent minus expenses, minus tax (at your marginal rate)
- Allowable expenses include lettings agent fees, insurance, repairs, and professional fees
- Mortgage capital repayments do not reduce your tax bill — only interest qualifies (as a 20% credit under Section 24)
- Your effective after-tax yield may be 30–50% lower than the headline gross yield
- Landlords with significant other income pay tax on rental profits at 40% or 45%
- Using a pension contribution to reduce total income can sometimes lower the marginal rate on rental profits
Frequently asked questions
What counts as an allowable expense for rental income?
Allowable expenses include letting agent fees, buildings and contents insurance, maintenance and repairs (not improvements), utility bills if paid by landlord, ground rent and service charges, professional fees (accountant, solicitor for tenancy), and other property-specific running costs.
Can I deduct the cost of furniture?
Since April 2016, the 10% Wear and Tear Allowance was abolished. You can now deduct the actual cost of replacing furniture and furnishings, but not the initial purchase for a furnished property.
Does this calculator account for the property income allowance?
The £1,000 property income allowance lets landlords with small rental income avoid Self Assessment entirely. This calculator is designed for landlords with income above that threshold.
How do joint ownership arrangements affect this?
Income from jointly owned property is split between owners according to their legal share. Each owner declares their share on their own Self Assessment.