As a first-time landlord, there’s quite a lot to learn about Buy to Let property tax. We cover all you need to know.
How Buy to Let property taxes work
When you buy a property to let, there are a few different types of tax to pay. These include:
Stamp duty tax (when you first buy the property)
Income tax and National Insurance contributions (on the rental income you get from the property)
Capital gains tax (when you sell the property)
How much tax you pay depends on factors that are unique to you. Like how much money you earn from rental income and any other jobs or businesses you have (more on this below).
Historically, all of this has been pretty complicated (cue: landlords tearing their hair out over every tax return). That’s why we invented Hammock, a property finance platform for landlords that lets you track payments and expenses in real-time, get key metrics on your investment, and massively cut down the time you spend filing taxes.
But back to this guide for now – read on for all you need to know about paying tax on a Buy to Let property.
Making Tax Digital (MTD) – what’s changing?
Before we get stuck into the ins and outs of Buy to Let property tax, there’s a big change coming up to be aware of. Making Tax Digital (MTD) is a government initiative designed to completely digitalise the Self Assessment (tax return) experience. It comes into effect on 6 April 2026, and will affect anyone who earns over £50,000 from property and/or self-employed income.
As a landlord, key changes to know are:
You’ll need to keep digital records of all anything relevant to paying tax (like your rental income and expenses)
You’ll need to use a software that works with MTD (like Hammock 😌)
You’ll need to submit updates every quarter instead of just doing a single Self Assessment each year
You’ll need to submit End of Period Statements (EOPS) once a year for each type of income you have (so, one for rental income, and one for self-employed income, for example)
It’s really important to note that using HMRC-recognised tax software will be non-negotiable for anyone earning £50k+ from property and/or self-employed income. So getting signed up to something in time is essential.
Taxes you’ll pay on Buy to Let properties
Here’s a breakdown of Buy to Let property tax.
Stamp Duty Land Tax is usually the first type of letting property tax you’ll need to think about. It’s a one-off tax payment, made when you buy a property. The Stamp Duty Land Tax rates are different for Buy to Let properties than the rates for a main home.
Buy to Let property purchase price
Buy to Let Stamp Duty Land Tax rate
£0 – £250,000
£250,001 – £925,000
£925,001 – £1.5million
Here’s an example of Stamp Duty Land Tax rates in action:
David buys a property to let for £400,000
He pays 3% Stamp Duty on the first £250,000
He pays 8% Stamp Duty on £149,999 (the amount between £250,001 – £400,000)
The total Stamp Duty land tax David pays is £19,499.92
Until 2020, landlords could deduct their mortgage interest payments from their rental income when filing their taxes. This made a huge difference to the amount of income they had to pay tax on. For example, if a landlord paid £10,000 in mortgage interest payments a year, they could remove this whole amount from their rental income, significantly lowering their tax bill.
But that’s all changed now. From 2017-2020 a new system was phased in that means landlords can now no longer remove their mortgage interest payments from their rental income. Instead, they can just claim a 20% rate tax credit on one of the below (whichever is lowest):
Finance costs (including mortgage interest payments, loan repayments, and overdrafts)
Profit from rental income
This means a lot of landlords are now paying more tax than they did a few years ago. And some are in a higher income tax bracket as a result, too.
How Hammock can help you
Figuring out how much tax you’ll end up paying on Buy to Let property income can feel like a minefield. But it doesn’t have to be. Our platform, Hammock, was developed by landlords for landlords to take the stress out of property letting finances.
Our secure Open Banking technology means all your income and expenses are tracked in one place, so you don’t need to sift through tons of paperwork, bank accounts, and receipts. Plus, you get real-time insights about your Buy to Let investments, so you can:
Easily view profit and loss statements for each property
Track how the valuations of your properties evolve over time with live loan-to-value calculations
Compare the performance of different properties and get actionable insights with our rental yield calculator
Our guide is for educational purposes only, as we don’t provide tax advice. We always recommend consulting experts (in this case your accountant or tax advisor) when dealing with rules and regulations.