Tax returns, advice and planning to keep your tax bill down and make the process as easy as it can possibly be.
Hi, I’m Simon.
I’m the Director of UK Landlord Tax and I’m also a landlord, just like you. One of the reasons property makes such an attractive investment is because of its potential to provide financial rewards not only for you but also for your family after you’ve gone. Inheritance tax can eat away at that legacy but there are ways to reduce its impact. Talk to us to find out more.
All of the work will be handled on your behalf by us. As soon as we receive your paperwork, our team will take care of all the bureaucracy on your behalf.
Each year, we prepare hundreds of tax returns for landlords, so we have an in-depth understanding of all the wrinkles and traps you might encounter if you attempt to handle your taxes on your own. As a client of ours, you can be confident that everything will be handled correctly, on time, and without error. In addition, we will be able to assist you with any questions HMRC may have regarding your return.
Every client’s situation is unique, so we look at their property as just one aspect of their financial situation. You’ll be informed if there are allowances or tax breaks you’re entitled to and we’ll ensure they’re claimed. Additionally, we can discuss ways to save money on your property ownership and management.
For those new to letting properties, the UK Landlord Tax starter kit is a comprehensive guide. This book covers everything you need to know from day one in an easy-to-understand language. Find out more by contacting us.
A simple guide to property rental income tax and property capital gains tax for UK Landlords.
Definitely – and it’s really important, too. The property income pages need to be included in your self-assessment tax return. In case you have not filed a self-assessment return in the past, you must inform HMRC of this new source of income by the 5th of October following the end of the tax year. You may be penalized or, in extreme cases, prosecuted if you fail to notify or disclose the income in time.
If HMRC is not aware of any source of income (excluding tax-exempt savings and ISAs) then not declaring it, if later discovered, could be considered tax evasion.
There are many ways HMRC catches landlords who don’t declare their rental income, as shown by the following article published in the national press: The Guardian 29/05/07
Net rental income from a solely owned property is taxable to you. Alternatively, if you and your partner own the property jointly, then any income generated will be split equally. In most cases, this would be a 50:50 split. Your taxes will be calculated individually for each of you.
Similarly, we assume that each month’s rent of £600 is gross, before deduction of allowable expenses. Before arriving at your taxable rental income, any expenses related to letting your property could be deducted from gross rents received.
These are just a few examples of deductible expenses, although this is far from an exhaustive list:
Interest on mortgages and other finance costs (limited to the basic rate of income tax for most residential properties)
Maintenance and repairs
Expenses for services
Fees charged by letting agents
Paying for electricity, gas, water, and council taxes on behalf of the tenant
Insuring contents and property
You won’t have to pay income tax if your allowable expenditures exceed your rental income. You will incur an annual loss from renting your property, which can be carried over and deducted from future profits.
Imagine that the property belongs to you solely, you earn £25,000 per year from employment, and your taxable rental profits, after deduction of expenses, range from £100 to £1,200 per year. If you are a lower-rate taxpayer, you will have to pay tax on you rental profits of £240, which will be approximately 20%.
To ensure that you have enough money to pay your tax bill, you might want to consider setting this amount aside. Higher income levels mean a higher effective tax rate, meaning you may be paying more than 20% in taxes.
You can’t. That’s the short, straightforward answer to this question.
The rent you charge for a property doesn’t matter whether you are related to the tenant, or not. In contrast, if you are renting the property below market value, you cannot set the losses against other rental profits, but can only carry them forward to set against rental profits earned from that tenant.
Depending on the circumstances, yes. Before you decide to go down this road, you should think about the following factors.
Types of ownership by individuals (England and Wales only)
Sole Ownership
An individual owns the property under his or her own name, and the income and capital gains are taxable to that individual. It is not possible to share income and gains with a spouse or civil partner for tax purposes.
Joint ownership (joint tenants)
Joint ownership means the property is owned jointly and if one owner of the joint ownership dies, the property automatically vests to the remaining owners. It is not possible to leave a joint property in a will until the last surviving owner becomes the sole owner. Likewise, since the individuals are entitled to equal shares in income and capital gains, they cannot elect to share income differently. As a result, beware. It is important to ensure that you have common ownership as tenants in common when buying a property in joint names with friends, for example.
Common ownership (tenants in common)
In this case, an individual owns a portion of the property. There may be an equal share or a difference in proportions. Upon the death of one of the tenants, the share of that tenant goes into their estate and is dealt with by their will or as per the laws of intestacy. In the case of joint ownership and non-married/civil partners, the income and gains are distributed proportionally between the owners. As a couple/civil partner, the income is treated as shared equally (regardless of beneficial ownership) unless both declare the split based on their beneficial ownership. Gains would follow beneficial ownership.
As a result of the above, here are some ways to save on capital gains taxes
Transferring property into joint names before a sale is a good idea if one spouse owns it in their own name and the other has not already used their CGT exemption for that tax year. This should be done with care, as HM Revenue and Customs may claim the transaction as invalid if it is performed shortly before a sale. Each spouse’s tax return must also include any income received after the transfer of the property, which may increase income taxes. Additionally, the property would need to be conveyed into joint names.
Not usually, no. Generally, losses on a rental income business can only be carried forward to offset future profits from that very same business. Your other income may be able to offset the losses if the losses resulting from surplus capital allowances on commercial lettings.
For this very common question, we have written a separate article which is a must-read for any landlord, regardless of how many properties they own.
No, in a nutshell. Materials, however, are clearly deductible. You should also be able to deduct the cost of your travel to the property, provided you are only travelling in connection with the forthcoming rental of the property. For time spent working on the property, you cannot deduct anything.
The first time most people own a property other than their main home is through this process. Selling it and taking the cash might seem tempting, but in these days of historic low interest rates, it makes sense to have a long-term source of income as well. Should you sell or let your property? With our tax return service, you will have no problem making this decision.
If you’re both owning your own places and decide to live together or get married, you find yourself with a spare place. Getting into the rental business through this method is a great way to make money. Not only will we manage your tax return, but we can also provide joint-ownership and tax planning advice in this case.
An investment property might be a good option if you feel your capital could be working harder for you. You can test the waters and see if you enjoy being a landlord by buying a single buy-to-let apartment or house. Let us guide you along the way, offering sound advice and providing the support you need.
''I am a UK based landlord who sought advice from UK Landlord Tax relating to the structuring of my limited company and the set up of a Family Investment Company (FIC) which Manjinder offered invaluable advice on. UK Landlord Tax have been super responsive, generous with their time and detailed in their advice. An extremely rare experience in today's fast paced business world. Majinder could give me chapter and verse on the implication of my children's US citizenship relating to the FIC which was an extra bonus. As far as value for money goes I couldn't have asked for more. Thank you''
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