Residential property letting
|Tax on rental business profits|
|Unincorporated1||income tax rates - 20/40/45% - Scottish income tax rates apply to Scottish taxpayers|
|Incorporated||corporation tax rates - 19%|
|Tax on chargeable gain on disposal:|
|Unincorporated||18% or 28% on excess over exempt amount for residential let property and carried interest|
|Incorporated||corporation tax rate of 19% apart from CGT on certain high-value property - rate is then 28%|
|Maximum letting relief exemption2||£40,000|
|Rent a room scheme income exemption||£7,500|
|Interest relief||In 2020/21, all financing costs are available only as a basic-rate tax relief against the tax arising on the rental profits.|
|Car mileage costs||Landlords are entitled to claim mileage allowances for travel in relation to their business of 45p for the first 10,000 miles and 25p thereafter.|
- The rate will be dependent on your taxable income for the year
- Letting relief is available on residential property where you are in shared occupation with the tenant.
Mortgage interest relief
Landlords are not permitted to deduct all of their finance costs from their property income to arrive at their property profits.
They instead receive a basic rate relief from their income tax liability on rental profits for their finance costs.
Finance costs includes mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan.
Where the rental profits are low, or are covered by personal allowance, the relief may be reduced to zero, with the balance of finance costs carried forward to a later year.