Income Tax on Landlords
As a landlord, you’ll need to pay income tax on rental Income you receive from your properties. With increasing costs and changing tax rules in the private letting sector, it is very important to get specialist advice from property accountants.
Get Professional Advice on Property Tax Planning
Tax on Buytolet properties
SPECIALIST TAX ADVICE
TAX ON RENTAL INCOME
If this is your first time acting as a landlord, you are required to report income tax on rental income and profits you derive from the property you rent out. Your rental income will be comprised mainly of the rent you receive from your tenants, but it will also contain additional charges you pass on to them. Some examples would include the cost of cleaning and maintaining shared facilities and the cost of any utility bills included in the rent. You must also include any percentage of the security deposit that you keep at the termination of the tenancy. Landlords who own more than one property can deduct the operating expenses from the total rental income they receive from their properties. This suggests that you can deduct expenses related to one property from rents associated with another.
Who We Are
We Are Specialist Property Accountants, Tax Advisors and Business Consultants
Our team consists of highly qualified accountants, Ex HMRC Tax Inspectors and industry-known business consultants
Choose the best Property Tax Accountant
If you are a landlord or a property investor, let our team of property accountants and tax advisors take care of your tax compliance.
We are here to help you with any questions you may have
Private landlords must pay income tax on rental income. In the United Kingdom, it goes by different names: landlord income tax, property income tax, buy-to-let income tax, etc. These are all synonyms for the regular tax payment you pay. First, income from all your rental properties is added together, and then any tax allowances, relief, or allowable expenses are taken away to determine your net rental income, which is the amount of profit you earn, and the amount of income tax you owe is calculated. (Total rental income minus property allowance or allowable expenses).
If the income is below the threshold for an eligible allowance under the tax system, it is not necessary to report it to HMRC. The sums involved are often small, and any corresponding tax loss is anticipated to be exceeded by collection expenses. Nevertheless, the allowances are excellent news for individuals since they allow them to earn money without having to pay tax on it. From April 6, 2017, individual landlords are eligible for a new £1,000 allowance for property income. Rental property businesses are also eligible for the deduction, whereas income from a partnership does not fall under this provision. If income is between £1,000 and £2,500, HMRC has instructed to contact them before filling or applying to register for self-assessment. Another tax-free allowance is the rent-a-room scheme which offers tax benefits to homeowners who are interested in renting out a spare room. Furnished short-term lets in an individual’s home can produce up to £7,500 in tax-free income every tax year under the scheme. You don’t have to be a homeowner to take part in the scheme.
Many property owners will go to great lengths to minimise their tax liability or even seek appropriate ways to avoid paying any tax. However, taxes must be paid on any rental income, so be aware of this. Any effort to evade tax by concealing rental income is illegal and will result in a full investigation covering at least six and can be extended to the last twenty years opening up an inquiry under COP8 or COP9. To answer your question, you may lower your tax burden by taking advantage of all tax reliefs, including all costs, and even modifying the form of your buy-to-let firm.
Not answered above?
If you need advice regarding your personal circumstances, please call our office or book an online appointment.