One flat, one house – we all have to start somewhere, don’t we? Whether you want your tax return dealt with or advice on keeping your tax bill down, our team can help.
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.
Having someone who knows property tax inside out to handle this accurately, on time, and within a budget makes life much easier.
Should HMRC require more information about your tax return, we will handle it for you. Getting to a resolution is our priority, so we speak their language and understand what it takes to reach a quick, uncomplicated conclusion.
The final bill is always the worst part of tax. Since the UK Landlord Tax team is so involved with property tax, we’re always on the lookout for ways to keep your bill down by claiming reliefs and allowances you might not have known existed.
For new landlords, our landlord starter kit offers an all-in-one guide that covers everything you need to know. Find out more by calling today.
A simple guide to property rental income tax and property capital gains tax for UK Landlords.
Yes – and it’s crucial as well. You’ll need to include the property income pages in your self-assessment tax return if you already file one. The deadline for reporting this new source of income to HMRC is 5 October following the end of the tax year ending 5 April if you have never filed a self-assessment return before. It is possible to face a penalty or, in extreme cases, prosecution if you fail to notify or disclose your income on time.
It stands to reason that if HMRC is unaware of your income (apart from tax-exempt savings and ISA’s), not declaring that income could be considered evasion if later discovered.
Yes, as HMRC has a wide range of powers and resources at its disposal. Here is an example of HMRC catching out landlords who have not declared rental income from an article published in the national press: The Guardian 29/05/07
Any net rental income earned by the property is taxed to you solely if it is held solely in your name.
Any income arising from the property will be split equally between you and your partner if you jointly own it. In most cases, the split would be 50:50. Each of you will be taxed separately in this case.
Furthermore, it is assumed that £600 is the gross rent each month before deductions for expenses. In order to determine your taxable rental income, any expenses related to renting your property could be deducted from gross rents received.
The following are a few examples of deductible expenses, though they are certainly not exhaustive:
Interest on mortgages and other finance costs (limited to the basic income tax rate for most residential properties)
Upkeep and repairs
Charges for services
Fees charged by letting agents
Several utilities were paid on the tenant’s behalf: electric, gas, water, and council tax
Insurance for property and contents
In this case, you will not have to pay taxes on the income you receive if your allowable expenses exceed the rent you receive. You can carry forward and offset your annual loss from the letting of your property against future profits.
Imagine you own the property in your sole name, that you earn £25,000 per year from employment, and that your taxable rental profits, after expenses, are £100 per month – £1,200 a year. Your rental profits, which in this example would be £240, would be subject to tax at the lower rate of approximately 20%.
In light of this, you may want to consider setting aside this amount to cover your tax bill. Your effective tax rate may exceed 20% if your income levels are higher.
The simple answer to this is no, you can’t.
A property can be rented to anyone, whether related to you or not, for whatever rent you wish. When renting the property for less than market value, you cannot set the losses against other rental profits; they can only be carried forward and set against the same tenant’s rental profits.
The answer is yes in certain circumstances. There are various types of ownership, and before deciding to pursue this path, it is advisable to consider the following.
Individual ownership types in England and Wales
Sole ownership
Property owned by one individual is chargeable to that individual for income and capital gains. For tax purposes, income and gains cannot be shared.
Joint ownership
In this situation, the whole property is owned jointly, and if one owner passes away, the remaining owners inherit the property. When a property is jointly owned, the last survivor becomes sole owner before it can be left in a will. Income and capital gains are shared equally because everyone is entitled to an equal share, and no election can be made for a different split of income. So beware. Be sure to check with your solicitor that you have common ownership when buying a property in joint names.
Common ownership
An individual owns a portion of the property. It may be equal or in different proportions. When a tenant dies, their share goes into their estate, where it is dealt with by the will or intestacy laws. When the property is owned by individuals without being married or civil partners, income and gains are divided proportionally. Married couples/civil partners are treated as having equal income (whatever the beneficial ownership) unless they both sign a declaration confirming their actual income split as determined by the beneficial ownership of the income and property.
Here are some ways to save capital gains tax based on the above
The transfer of a property into joint names before a sale would be advisable if one spouse owns the property in their own name and the other spouse has not yet used their CGT exemption. The transaction needs to be carefully timed, since HM Revenue and Customs may challenge the transaction if it occurs shortly before the sale. It is also important to ensure that each spouse’s tax return includes income received after transfer of the property, which may result in an increase in tax payments. Additionally, the property would have to be conveyed into joint names.
There is a special article we’ve written about this question – a must-read for any landlord, regardless of how many properties they own: Allowable expenses against rental income
No, in a nutshell. Material costs, however, are clearly deductible. Your travel expenses to the property should also be allowable, provided that they are solely related to renting out the property. The time spent working on the property, however, cannot be deducted.
Often, people first acquire a property other than their main residence in this manner. Although it might seem tempting to sell it and take the cash, there are benefits to having a long-term source of additional income, especially now that interest rates are historically low. Should I sell or let my property? With our tax return service, you won’t have to second guess your decision to become a landlord.
If you both own your own homes, if you decide to live together or get married, you have a spare house to let. This is an excellent way to get started in the letting business. In this case, we are able to advise on joint ownership and tax planning in addition to managing your tax return.
Investing in property might be the answer if you want your capital to work harder for you. If you’re thinking about becoming a landlord, buying a buy-to-let apartment or house is a great way to test the waters. Whether you decide to turn this opportunity into a property empire or not, we’ll assist you every step of the way.
''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''
Via FreeIndex
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