Rental income

Rental income is the money you receive from letting out a property, usually under an assured tenancy or assured shorthold tenancy, or a licence in the case of lodgers and short lets. For most landlords it is taxable income, forming part of your UK property business for self-assessment or corporation tax.

From a landlord’s perspective, rental income includes:

• The rent paid under the tenancy agreement.

• Certain other sums the tenant pays to you that are properly part of the rent. For example, if you recharge utilities on a fixed, inclusive basis.

Under the tenant fee rules, carried forward in the Renters’ Rights Act, you cannot pad rental income with prohibited fees (such as admin, inventory or check-out fees) beyond the list of permitted payments. Trying to rebadge general running costs as “fees” can lead to enforcement action and make it harder to regain possession.

For tax, you are normally taxed on rental income after allowable expenses, such as repairs, agent fees, insurance and replacement of domestic items, but not capital improvements. The Renters’ Rights Act does not change core tax rules, but tighter standards (MEES, Decent Homes, Awaab’s Law) mean more planned spending to keep properties compliant, which should be factored into how you set and review rents.

Also read our landlord blog articles on:

• Is short term letting still profitably in the UK?

Also see our free landlord calculators:

• Rental yield calculator

• Rental cashflow calculator