Inland Revenue Tax Returns for Property Owners


Renting one or more properties is treated by the Inland Revenue as a business for tax purposes. If you rent more then one property you can offset losses from one against another. We answer some common questions about being and landlord and completing a tax return on your rental income:

What are residential lettings?
Any property you rent out for other people to live in is classified as a ‘residential letting’. There is a difference for tax purposes between ‘residential lettings’ and holiday lettings.

If you rent a room in your house this could also be classified as residential lettings, but you can take advantage of the Inland Revenue’s ‘Rent-a-room’ scheme, which allows you to recieve up to £4,250 tax free.

Do I need to complete a tax return if I rent a property?
If you make over £2,500 a year from your rental property, you will need to complete a tax return. If you total income for your property is over £15,000 in the tax year you must declare it on the land and property pages of your Self Assessment tax return.

How much tax will I pay on my rental property?
Any expenses that you incur when renting your property will be taken off the income you recieve from it. The remainder is profit and this will be added to your other income and taxed at your tax rate.

What expenses are allowable for renting a property?
If you have any residential lettings you can reduce your tax liability by offsetting any allowable expenses against your rental income. These expesnes could include:

  • letting agent’s, and lawyers/legal fees
  • building and contents insurance
  • mortgage/loan interest for your property
  • maintenance and repairs -improvement costs are not allowed
  • rent, ground rent and property service charges
  • Council Tax
  • advertising your property to rent
  • other costs, such as phone calls

How long do I need to keep my expense information for?
You need to keep any records relating to your rental property for 6 years, whether you completed a tax return or not.


316 comments

  1. Jane Cookson says:

    My husband and I have recently bought a property to rent out. The house in in our join names but my husband pays more tax than me. My question is – who actually needs to complete the tax return, as if I were to do it in my name my wages plus the rental income will safely be under the higher rate. Where as if my husband would probably be pushed into the higher rate bracket. Can I complete the tax return?

  2. bs says:

    I have a house on my name but a joint mortgage on my and my husbands name. Does he need to pay tax on the income from the rental even if it is coming into my account?

  3. June says:

    I rent out a propety but rent does not cover the mortgage and service charge. I pay the shortfall of 380 pounds a month. Do i need to declare?

  4. Brian says:

    I jointly own a 2nd property with my sister. Only my name is on the deeds, but we both paid equal amounts to purchase the property, and to finish the apartment off – kitchen/bathroom/flooring etc to make it liveable. The property is abroad, and we have bank records of the monies that were transferred from out accounts. When we sell the property are we able to split the money received and each pay CGT, or, do i have to declare it all in my name only?

  5. Stuart Wright says:

    We have a property that we rent out to our son, for £480 per month do we have to declare this as Rental Income ?

  6. Paul says:

    I have a buy to let property that I rent out. The morgage is in my name. Can my common law partner receive the rent to save income tax as I am top rate & she has no income?

  7. nic says:

    Hi we have had to move out of our house due to personal circumstances. We hope to sell but if we cant we will have to rent itout. My question is how will this affect tax credits and am I able to claim financial assistance on our house we are currently paying rent for if I have a property that i am lettingout but is running at an overall loss? I am currently on maternity leave but would rather take a career break if possible financially.

  8. carol says:

    I suspect my landlady is not paying tax on this property she is renting to me , I have been here since November 2008 and renting it for £465 per calendar month , the money goes straight into her bank account which she changes frequently . I also suspect she has not told her mortgage company she is renting this property out as her mortgage statement came and said it was still a repayment mortgage. what can I do

  9. inanda says:

    Hi,
    My husband and I have been letting a property for a few years but the rent just covers the mortgage and we do not take any money, do we have to pay tax?

    • TaxFix says:

      inanda: You only pay tax on any profit from your rental property. Is the mortgage interest only or a repayment one? Only the mortgage interest can be deducted as an expense.

  10. Mickey says:

    I have a buy to let property, with the mortgage in my name. If I put my sons name (over 21) jointly with mine on the mortgage (subject to lender allowing):
    1.Does my son’s name get listed on the deeds?
    2.Is the Inland revenue made aware of this?
    3.I assume that I would then be only taxed on half of the rental income?

  11. Anonymous says:

    Hello
    I am a pensioner and my property business is running at a loss and my husband and I are living on my pension only and finding it difficult to pay our way. Can I apply for pension credit during this difficult period.

  12. B Rogers says:

    Do estate agents notify the inland revenue of the properties they let on behalf of their tenants ?

  13. phillip says:

    are the tax office more likely to find out that i have not completed a tax return for the last 3 yrs if the tenant is receiving council tax benefits?

  14. Toni says:

    Hi
    I am considering moving abroad and letting my house out.

    The rental value is 1200 pcm. Will I have to pay tax? I will not have any other means of income in England and also will have to pay rent of a similar value abroad.

    Thank you!

    • TaxFix says:

      Toni: Yes, you’ll have to pay tax on any profit from your rental. Your rent abroad can not usually be offset against this.

  15. Eileen says:

    I am a pensioner aged 67 and only received a basic state pension but am about to rent out my house for around £700 p/month will I have to declare this and pay tax

  16. caroline says:

    I don’t work as I am a housewife and my husband is a higher rate tax payer. We have 4 children so will it be better for us to stop our child benefit or to pay it back through my husband’s tax? We rent out a property which is in joint names.

  17. caroline says:

    My husband and I rent out a property which is in joint names, I don’t pay tax as I am a housewife and my husband pays the higher rate of tax on his income. Do I still need to fill a SA form out? On my husband’s form does he show all income and expenses as halved?

  18. Jon says:

    Two brothers own a uk property which they rent the deeds and mortgage are in joint names.Does the taxable profit from the property have to be split 50/50 or can one brother take the whole taxable profit.

  19. jay says:

    I am thinking about buying a second home to rent out. If I take a mortgage in the home I live in to buy my second home can I use the interest on this mortgage as expenses even though the mortgage is on my property I live in and not on the property I let out? Hope this makes sense.

  20. Caroline says:

    Dear Sir/Madam,

    My neighbout is renting out 3 rooms in his house. I know as a fact as the she doesn’t pay tax and doesn’t inform anyone.

    I found it realy unfair as I am paying all the taxes from my income and while such a person gets profit apart from standard income and doesn’t declare that.

    I am afater advise and also wonder if someone sould check people like that and make them pay money which they supposed to

    Regards
    Caroline

  21. lucy hall says:

    I own a bungalow jointly with my husband which we are letting out until we move into it in a few years time. We are both retired but my husband’s income (together with his half of the rental income) is less than £7,000 p.a. He is registered as self employed but is unable to find work. Can he charge for his time taken in the decoration and gardening at the property, also for his fuel costs for travel (a 20 mile round trip)? and for this to be offset against both our tax bills ? I receive state pension, but he is not old enough yet. Thankyou

  22. Jane says:

    spanish tax authorities asking for confirmation that our property company is a uk taxpayer. Is there a template that can be used?

  23. Gemma says:

    I am a mortgagee for the house I am living in. My other half is going to move in and give me some rent. Do I have to declare this to the tax office?

  24. Lorraine says:

    My brother an I own a property that we are going to rent out – can I just do the tax return or do we both need to. There is a mortgage on the property and it is in joint names

  25. Bats says:

    Hi I am in the process of remortgaging my house to buy another property which i am putting in my sons name. What i would like to know is that currently i receive working tax and child tax. would i lose all this is the house was in my name or im i doing the right thing in putting it in my sons name. My son wont be living their, we are going to rent it out. as the mortgage will be on my property can i use the rental money to pay the mortgage on mine.
    Thanks

  26. gurpreet says:

    Hello, my husband and I are in the process of buying a house to rent out. I am a housewife and do not work, whilst my husband is a high tax payer. In order for me to be the one to get taxed on the income for the rent how would we need to set up the purchase? Would it be in joint names or just my own? or is it purely down to where the rent is paid into?

  27. Nick says:

    I am just about to purchase a holiday home. While we will use the property ourselves, we aim to also rent it out.

    It is a cash purchase and we expect to make around £4,000-5,000 per annum. The property will be in my sole name as I do not work and currently have no other forms of income.

    My initial query is; do I need to register as self employed? And I take it I can use the purchase and initial costs to furnish the property against first year ‘profits’?

    Do you have any advice and top tips for holiday lets and the tax implications?

  28. richard says:

    hi i have a small property, my wife and i were looking at renting through an agency it out while i work australia possibly for a few years.

    my father has expressed a wish to live in the property while we are away. this is a win win situation for us, i have family in our home know its looked after and i know the people in it. no need to go through agent and pay fees.

    what happens if i pay the mortage? there is no rental income so no tax to pay?

    if my dad pays part of the mortgage or all does that class as rental income?

    do i still need to let the tax man know?

  29. Leonard Marsh says:

    I have a house left to me by my mother, which I rent out. My wife and I are both pensioners and its my wife who looks after the management of it.Example finding tenants,arrange for repairs etc: etc: My question Is this, can I not pay my wife for this service? instead of paying a 3rd party and use this payment as an expence to be used for incometax purposes. As I would If paying a 3rd party.Providing ofcourse that the payment is added to my wifes income. I would prefer to do this anyway as I know I would be getting a 1st class service.

  30. Shaz says:

    Hi I just wanted to find out that if someone lives in a council house can they buy another property. Thanks

  31. Hayley O'brien says:

    If I am to be named on a mortgage so a friend can keep their house, but I don’t live there, will my tax credits change
    I won’t be paying into the house at all it’s just my name

  32. Allan says:

    If I rent out my property but use any income received to pay off the mortgage, will I need to pay tax on it?

  33. sarina says:

    hi im thinkin bout buying 2 bed flat for daughter will i have to get buy to let mortgage

  34. D says:

    Hi, I am about to rent out a property, with rental payments covering the mortgage payments only. My only expenses are the household and contents insurance. As I will be making no money out of this, do I need to fill in a tax return. If so, when would I need to fill one in if I started rental in October? Thanks :)

  35. Suzanne says:

    Hi I currently rent out my flat for £350 a month and my mortgage repayments each month total £348. Do I need to complete a tax return?

  36. barbarahinson says:

    My daughter is renting out her flat, she was made redundant, we would like to know if her payment for her mortgage payments or any other expences are taken into account before a decision is made by the tax office about wether she is allowed any unemployment money or jobseekers

  37. julia says:

    I am a french citizen. I have bought a house 5 years ago and i am now back living in France. Is it correct that due to the fact that I am not resident in the UK anymore, if i sell the property with profit, I won’t be liable for Capital Gains Tax?

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