Landlord tax for UK residents

Tax returns, advice and planning to keep your tax bill down and make the process as easy as it can possibly be.

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Simon Thandi, UK Landlord Tax

Hi, I’m Simon.

I’m one of the Directors of UK Landlord Tax and as it happens, a landlord myself. I still remember the thrill of acquiring my first rental property. Back then, I had a lot of questions and there were times when it felt like more of a challenge than an opportunity. But mighty oaks from little acorns grow, as they say. If you’re just starting out on the landlord journey, get in touch and let my team give you a helping hand.

Becoming a landlord should be exciting, not an ordeal

We make property tax easy by…

Doing your tax return

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.

Getting it right

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.

Reducing your tax bill

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.

Setting you off on the right track

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.

Download our FREE UK Property Tax Guide.

A simple guide to property rental income tax and property capital gains tax for UK Landlords.

Current tax rules

Dealing with HMRC

How our tax system works outside of PAYE

Frequently asked questions

Do I have to inform the taxman that I let out property?

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.

If I rent out property, how will the tax man know?

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

My rental income is £600 per month, and my salary is $25,000 per year. How much tax do I have to pay?

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.

What if the property deal fell through? Can I claim tax relief on the costs?

You can’t. That’s the short, straightforward answer to this question.

Do I have the option of letting my daughter the property at a reduced rate?

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.

Can I split the ownership of a property which is jointly owned and save tax?

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.

Is it possible to offset my rental losses against other income?

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.

Is it possible to deduct expenses from my rental income?

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.

Allowable expenses against rental income

Is it possible to claim my time spent on DIY renovations and redecorating?

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.

  Fees for single owner

Single owner

One property

A tax return package for people who own and rent out a single flat or house. Ideal for accidental and first-time landlords.

from

£175

+VAT

Single owner

Two properties

For individuals who have acquired a second rental property and need help with a more complex tax situation.

from

£200

+VAT

Single owner

Three properties

When you’ve begun to turn property into a business and have three properties to let, it’s time for some serious tax planning.

from

£225

+VAT

Single owner

Four or more

Tax processing for people with a multi-property portfolio. The ideal package for professional landlords and developers.

Contact us to get a fixed fee quote

  Fees for joint owners

Joint owners

One property

If you and a partner, spouse, family member or friend jointly own a single property, we’ll do tax returns for both.

from

£300

+VAT

Joint owners

Two properties

A great value, straightforward tax return package for two people who share ownership of two UK rental properties.

from

£330

+VAT

Joint owners

Three properties

A comprehensive tax return service for people who together have three houses or flats on the UK rental market.

from

£440

+VAT

Joint owners

Four or more

Our package for those sharing ownership and management of more substantial portfolios of four or more rental properties.

Contact us for a fixed fee quote

Let‘s talk about property tax today

When it comes to fixed-fee tax returns for UK landlords, nobody does it better.

Our single-property tax services are for you if you…

Have inherited a flat or house

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.

Are moving in with a partner

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.

Have property as an investment

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.

a man in glasses smiling

Generous with their time and detailed in their advice

''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''

SANDRO G - JUNE 2023

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Jennie, UKLandlordTax

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