Plenty of people around Sevenoaks, Westerham, Otford and Borough Green find themselves receiving rental income later in life. It might come from letting a former family home after downsizing, renting out an inherited flat, or taking in a lodger now the children have moved out. Rental income can be a valuable top-up to a pension, but it brings Self Assessment responsibilities and a few rules worth understanding. Some important changes are also on the way from April 2027.
Is your rental income taxable?
In most cases, yes. Rental profit is added to your other income, such as the State Pension, private or workplace pensions and savings interest, and taxed at your usual Income Tax rates. Because your pensions may already use up much of your Personal Allowance, rental profit can be taxed from the first pound. In some cases it can push part of your income into the higher-rate band.
There are two useful exceptions for smaller amounts:
- The £1,000 property allowance: if your gross rental income is £1,000 or less in a tax year, you generally don’t need to declare it. Above that, you can choose to deduct the £1,000 allowance instead of your actual expenses, whichever is better.
- Rent a Room relief: if you let furnished accommodation in your own home, such as a lodger, you can receive up to £7,500 a year tax-free (£3,750 each if the income is shared). You can’t use the property allowance on the same income.
What expenses can landlords deduct?
If you let a separate property, you’re taxed on your profit, not the total rent. Common allowable costs include:
- letting agent and management fees
- repairs and maintenance (but not improvements, such as an extension)
- landlord insurance, ground rent and service charges
- council tax and utilities, if you pay them rather than your tenant
- safety certificates, such as gas safety and electrical checks
- replacing furniture, appliances and furnishings in a furnished let, on a like-for-like basis
- accountancy fees for your property income
Mortgage interest works differently for residential lets held personally. You can’t deduct it as an expense. Instead, you receive a tax credit, currently at 20% of the interest. If you’re a basic-rate taxpayer, that usually gives full relief. Higher-rate taxpayers receive less relief than the tax they pay on the same income.
What’s changing from April 2027
From 6 April 2027, property income in England, Wales and Northern Ireland will be taxed at its own rates: 22% (basic), 42% (higher) and 47% (additional). That’s 2 percentage points higher than the usual rates. The government has also said the tax credit for finance costs such as mortgage interest will be given at 22%. Allowances will also be applied in a new order, with the Personal Allowance set against other income, such as pensions, before property income.
For a retired landlord with modest pensions and a single let, the increase may be small, but it is an increase. It’s worth checking whether things like the ownership split between spouses, or the timing of repairs, deserve a fresh look before April 2027. The Autumn Budget on 28 October 2026 may bring further detail, so we’ll keep clients updated.
Making Tax Digital may apply to you
Making Tax Digital for Income Tax applies according to your “qualifying income”. This is your gross rental income plus any self-employed turnover. Pensions and savings interest don’t count. If your qualifying income for 2025/26 is over £30,000, you’ll need to keep digital records and send quarterly updates from April 2027. If it’s over £20,000, that applies from April 2028. Many retired landlords with one property will fall below these levels, but it’s worth checking your figures now.
Deadlines to remember
- 5 October after the tax year in which you first had rental income: tell HMRC you need to file a return.
- 31 January: file your online return and pay any balance due. For 2025/26, that’s 31 January 2027.
- 31 July: second payment on account, if HMRC asks you to make them.
Frequently asked questions
Can I avoid a tax return if my pension is taxed under PAYE?
Usually not. Once your rental income is above £1,000, you’ll normally need to tell HMRC through Self Assessment, even if all your other income is taxed at source. In some limited cases HMRC can collect tax on small amounts through your tax code, so ask us first.
We own the property jointly. How is it taxed?
Married couples and civil partners who own property jointly are normally taxed 50:50. If you own it in unequal shares, you can elect to be taxed on your actual shares by sending HMRC a declaration. This can sometimes reduce the overall tax bill.
What happens when I sell the property?
If it isn’t your main home, you may have Capital Gains Tax to pay, and you must report and pay it within 60 days of completion. Speak to us before you sell, because good planning can make a real difference.
Personal advice from your local accountant
Coplestons is a friendly, personal practice in Kemsing, near Sevenoaks. We take the worry out of tax returns for retirees and private landlords across West Kent. We’ll prepare your return, make sure every allowable expense is claimed, and explain clearly what the 2027 changes mean for you. See our services, read about us as accountants in Sevenoaks, or call 01732 762886 (Monday to Friday, 9am to 5pm). You can also send us a message.
Correct as at 20 October 2026. This is general information, not personal advice.