We’re on the landlord‘s side, every time.
Specialists in tax returns for landlords
Tax returns for UK residents
If you live in the UK and let one or more flats or houses, we’ll get your tax return filed, claiming all the reliefs and allowances for which you’re eligible.
If you live overseas and have a UK rental property or several, we’ll take the complexity out of managing your annual UK tax return and filing it with HMRC.
Frequently asked questions
Should I tell the tax man that I let out property?
In short, yes. If you already complete a self-assessment tax return, you need to complete the
Property Income pages. If you have not completed a self-assessment return in the past, you have a statutory duty to disclose the new source of to HMRC before the 5th October following the end of the tax year ending on 5th April. If you fail to notify or disclose the income on time, you could be liable to a penalty or in extreme cases to prosecution.
In any case, common sense should tell you that if you have a source of income that HMRC is not aware of (apart from tax-exempt savings and ISAs) then not declaring it, if later discovered, may be looked on as evasion.
How will the tax man know if I am renting out property?
A good question. HMRC has far and wide-reaching powers and resources, perhaps best illustrated by the following article published in the national press and highlighting some of the ways HMRC “catch” landlords who have not declared their rental income: The Guardian 29/05/07
How do I work out how much tax I have to pay, I have rental income of £600 per month and my salary is £25,000 per annum?
On the basis that the property is held in your sole name, any net rental income is taxable on you. If however the property is owned jointly, any income arising will be split between you and your partner (usually this would be split 50:50) and taxed on you both individually. (Please see our article on who should own the property).
Also on the basis that the rent received of £600 per month is gross (before deduction of allowable expenses).
Any expenses of a revenue nature incurred in relation to letting your property may be deductible from your gross rents received before arriving at your taxable rental income.
Some examples of deductible expenses are as follows, although these are by no means a complete list:
Mortgage interest and other finance costs (restricted to the basic rate of income tax in the case of most residential properties)
Repairs and maintenance
Letting agents fees
Electricity/gas/water/council tax where paid on behalf of the tenant
Property and contents insurance
If you incur allowable expenditure which exceeds the rents you receive, you will not have any income tax to pay. In fact, the letting of your property will give rise to an annual loss which can be carried forward and offset against profits that may arise in future years.
By way of example, say the property is owned in your sole name, your only other income is employment income of £25,000 per annum and your taxable rental profits (after deduction of expenses) are £100 per month (£1,200 per year). You would be a lower rate tax payer and tax of approximately 20% will be payable in respect of your rental profits, which in this example would be £240.
You may wish therefore to consider setting this amount aside to ensure that you have sufficient funds to pay your tax bill. If your income levels are higher, you may be a higher rate tax payer and your effective rate of tax may be more than 20%.
Can I claim tax relief on the costs or a property deal that fell through?
In short… No.
Can I let a property to my daughter at a reduced rent?
There is nothing to stop you letting out a property to a connected person or anyone else for that matter at whatever rent you wish to charge. However if you are renting the property at below the market value you cannot set the losses against other rental profits and can only carry the losses forward to set against rental profits earned from the same tenant.
Can I claim for my time doing DIY renovation and redecoration work?
In short… No. However, the cost of materials is clearly deductible. The cost of travel to the property should also be allowable, provided the only reason for your trip is in respect of the property and its future rental. However, you cannot deduct anything for the time you spend working in the property.
What expenses can I deduct against my rental income?
A very common question to which we have provided a separate detailed article. A must read for any landlord big or small.
Can I offset my rental losses against other income?
Not normally. Generally, losses on a rental income business can only be carried forward to offset against future profits from your rental income business. If the loss arises from surplus capital allowances on commercial lettings or from certain agricultural expenses, you may be able to claim the losses against your other income.
I have heard that you can split the ownership of a property which is jointly owned and save tax. Is this right?
In certain circumstances, yes. Ownership can vary and before you consider going down this road it would be wise for you to consider the following:-
Types of ownership by individuals (England and Wales only)
This is where a property is owned in one individual’s name and the income and capital gains are chargeable on that individual. Income and gains cannot be shared with a spouse or civil partner for tax purposes.
Joint ownership (Joint tenants)
This is where the whole property is owned jointly and if one of the joint owners dies then the property automatically vests with the remaining owners. The interest in a jointly owned property cannot be left in a will until the last survivor becomes sole owner. Because the individuals are entitled to an equal share in the whole of the income and capital gains, they are shared equally and no election can be made for a different split of income. Therefore beware. When buying a property in joint names with friends say, make sure you check with your solicitor that you have common ownership as tenants in common. See below.
Common ownership (Tenants in common)
This is where effectively a proportion of the property is owned by an individual. This may be equal or it may be in different proportions. If one of the tenants dies then his/her share goes into their estate and is dealt with by the will or according to the rules of intestacy. If the property is owned in different shares and the owners are not married/civil partners then the income and gains are divided in proportion to the ownership. In the case of married couples/civil partners, the income is treated as shared equally (whatever the beneficial ownership) unless they both make a declaration confirming the actual split of income based on the beneficial ownership of the income and the property. The gain would follow the beneficial ownership.
Given The Above Here Is How to save Capital Gains Tax
If one spouse owns a property in their own name, it would be an idea to transfer the property into joint names before a sale assuming that the other spouse has not already used their CGT exemption in the tax year concerned. Care does need to be taken as if this is carried out shortly before a sale, then HM Revenue and Customs may attack the transaction as invalid under anti-avoidance rules. You also need to ensure that any income received in the period after transfer of the property is declared on each spouse’s tax return which may increase the income tax paid. There would also be the costs of conveying the property into joint names.
Take the next step
Whether acquiring property means you find yourself having to submit a tax return for the first time or you’re an experienced business person who wants to save valuable time, we can help.