PIM1001 - Introduction: overview
Source: gov.uk (2025-06-09)


The key features of the income tax and corporation tax systems for taxing rents from UK properties are:

Profit and loss computations must be on a tax year basis. That is, the profit for the year ended 5 April 2024 is charged for 2023-24 and so on for later years (PIM1010 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1010)). There have been two exceptions: a property let by a trading or professional partnership uses the trade basis period (PIM1040 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1040)), and; the trade basis period applies where the letting amounts to a trade, as in a hotel or guest house business (PIM4300 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4300)). NB The trade basis period rules cease to apply from 6 April 2024 following transitional arrangements in the tax year 2023-24 – see the Business Income Manual from page BIM81200 (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81200).

Tax applies to both furnished and unfurnished lettings, including furnished holiday lettings (PIM4100 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4100) onwards) and rent-a-room receipts (PIM4000 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4000) onwards - income tax only). The government announced that the furnished holiday lettings rules will cease to apply in tax years commencing on or after 6 April 2025.

Replacement of domestic items relief (PIM3210 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim3210) onwards) allows a deduction for certain capital items.

Profits and losses of a property business are computed using the cash basis for most income tax customers as of 2017-18. This is subject to certain exceptions (see PIM1090 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1090) onwards).

For those excepted from the cash basis, as well as those within the charge to corporation tax, normal trading income rules are used, commencing with accounts drawn up in accordance with generally accepted accountancy principles and subject to appropriate adjustments. See PIM1100 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1100) onwards.

From tax year 2017-18, a property allowance is available which allows property income under £1,000 to be fully relieved - or where property income exceeds that threshold, partial relief may be available (PIM4400 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4400)).

The self-assessment rules for payments on account and balancing payments apply in the same way as for other income.

Rents from properties outside the UK are returned as foreign income and not as UK property income (PIM4700 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4700) onwards).

From 6 April there has been a restriction on relief for residential mortgage and other loan interest for income tax purposes (PIM2050 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2050)onwards). The changes were phased in from April 2017.

For 2005-06 onwards the main IT rules for taxing property income have been brought together in Part 3 of ITTOIA05.

From 2020-21, non-UK resident companies are charged to CT (and not IT) on their income from UK property.

Please contact HMRC's Business, Assets and International Directorate if you need guidance on the rules that applied for taxing the rental income of:

IT payers before 6 April 1995, and

CT payers before 1 April 1998.

Legislation

For income tax payers, that is individuals, trustees and non-resident companies (to April 2020), tax is charged on property income under Part 3 of ITTOIA05 for 2005-06 and later tax years.

For corporation tax payers (including non-resident companies from April 2020), tax is charged on property incomeunder part 4 of CTA09 for accounting periods ending on or after 1 April 2009.

Provisions which must be given priority

ITTOIA05/S4 (1) makes it clear that a charge under Part 3 of ITTOIA05 (property income) generally has priority over a charge under Part 2 of ITTOIA (trading income).

The sort of receipt to which this rule might apply is rent received by a property developer from the temporary letting of land awaiting development. The rent is taxed as property income, even if it could properly be regarded as a trade receipt. PIM4300 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4300) discusses when an activity is classed as a trade, a property business or a mixture.For exceptions to this rule see PIM1114 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1114) (wayleaves) and PIM4700 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4700) onwards (Rent from property outside the UK).