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. julia says:

    i don’t know whether my question is showing
    For non resident in the UK when selling a property is it correct that there won’t be a capital gains tax when property sold?
    Kindly adivse

  2. 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?

  3. trevor says:

    Hello, do i need to pay tax on property we share with my sister in law , we recieve 6000 a year and pay 10% to property agent , and half the money between us so 5400/ 2 = 2700 a year , we have also paid for property up keep on top of things can we deduct this from 2700 before tax, thanks , Trev

  4. Mark says:

    I need to rent out my flat as my new partner and I are expecting a child and she will not receive an income other than maternity pay. I live at her flat but we are not married. I earn slightly above the 40% tax threshold.

    Is there a way I can use her tax status to avoid paying 40% tax on the income from the flat?

  5. Sandra says:

    I am relocating to a new area and plan to rent my house out for a minimum of 12 months. I will need to rent a property in the new area I move to. Is the rental I receive from my property classed as income for tax purposes as I am not actually making money on it? Thanks in advance for your advice

  6. Taxing question says:

    I have a property and make approximately 550pcm, including annual expenses I make around 4000pa. Can I transfer this money into my 2 children’s accounts as a gratuity for Collage/University, without penalties.

    Many thanks in advanced for your response.

  7. Taxing question says:

    I have a property and make approximately 550pcm, including annual expenses I make around 4000pa. Can I transfer this money into my 2 children’s accounts as a gratuity for Collage/University, without penalties.

    Many thanks in advanced for your response.

  8. bethan says:

    my father is 73 yrs of age and i live with him in a council house he is the named tenant i was curaantly doing a course and was getting payed for it at £350 a month for 12 months and qualified in march i was allso getting cares allowance now i get carers allowance and £180 something to £200 and something a month for my pay as a playworker do i have to mention any changes to the council in my income be it bigger or smaller

  9. John Perkin says:

    I am a UK citizen and I live in the UK. I have a US property, if I rent this can I claim the US property tax as an expense

  10. Mary Smith says:

    My sister who lives in Canada lets a property in the UK. The tenant pays the rent into my husband’s account and my husband gives my sister the rent every year when she visits. As the profit made on the rent received is less than her annual tax allowance no tax is due. However, in naming my husband as her ‘agent’ for which he receives no fee will he be liable for tax and will the revenue believe him when he says he does not receive any money for collecting the rent?

  11. Becky says:

    I will be renting out my flat for £500pcm, this will be to cover ground rent mortgage and sky. I will be making £50 profit a month but this is to cover costs of any furnishing/maintenace issues. As this works out as a £600 profit (working on a year basis) do I need to fill out a tax return form?

  12. Becky says:

    I am thinking about renting my flat out. The rent we be £500pcm. Once all bills have been deducted from this to cover morgage ect, I will only make a profit of £25 but this is to cover any maintenace within the property, do I need to inform the inland revenue? I am employed full time.

  13. Celia says:

    As a freeholder of property that is my home I was paid money from leaseholder in ground floor flat below to extend their lease.Where would I put that money on a tax return ?

  14. Olly says:

    If my dad buys me a house am i going to get taxed more from my wages?

  15. nikki says:

    i am living with my partner, he is self employed and owns his own property. i dont work as we have dependants… our income isnt great and i was renting out my property. however the tenant moved out in may and we had to put the property on the market.. also we are 2 months behind with the mortgage payments…does anyone know what happens to our tax credits should i sell the property as we are struggling in a 2 bed house so when i sell my property all monies received have to go towards building another room. thanks

  16. shelley says:

    my dad has a rental property, he makes 1100 pcm and he pays mortgage on a different house which is 900 pounds, in a month his profit is 200, but he is on low income and by the end of the year he makes no profit from the house, by paying for the mortgage and bills. Is that classified as a loss and does he need to let the authorities know about this?

  17. Carol says:

    Hi I cannot currently afford to sell my property but I wish to move so I am thinking of renting my property out and renting an equivalent elsewhere. If I am not making any income on my property because I will be paying the equivalent amount of rent on a rental myself, do I still have to pay tax? If I do then the only way to do it would be to move into a smaller property I presume otherwise I will be much worse off than if I just stay in my own property? Thank you

  18. robert reading says:

    i have rented a flat for almost 6 years for £400 per month. the mortgauge is £280 a month and i have been out of work due to a health problem almost 2 years,but now am moving back into my property,do i have to inform the inland revenue
    especially if i need to sell it?

  19. Nick says:

    Please help. I rent my flat out whilst staying with my girlfreind. I don’t know if i need to declare this, as the income is running at approx minus £1200 loss per year: income take away bills & mortgage. I don’t know what to do, & now concerned as its been about 3 years like it. My flat is at a loss as my freind looks after it, & i charge him a small amount in return. Is there a tax form or something?

  20. E Brown says:

    My house buyer just pulled out and I want to go ahead and buy my new house by selling my investments. Then when I eventually sell my old house, will I be subject to capital gains tax? I am a UK resident and both houses are in the UK.

  21. A Smith says:

    I rent out a property to a family member, I pay the mortgage out of the money received. Do I still need to complete a SA if it’s a family member living in the property? Also, will I get in trouble if I have never done one and have had the property for 8 years? I have only been getting an income since mortgage rates dropped so last 3 years.

  22. Pam says:

    I live with my partner who has a mortgage on the property. We share a bedroom but have a spare unused bedroom (storage only). He thinks that because I contribute to him each month he has to declare this to the revenue under the rent a room scheme. I cannot see he is right. for all intents and purposes we are a couple and have been for 3+ years.

  23. Steven says:

    I would like to know, after I have sold an investment property at a loss, therefore still owe money to the bank and paying interest, can I still claim the interest expenses when I prepare my return?

  24. S&L says:

    We have a rental property in the canaries which now costs us a fortune as it basically sits empty we also have rentals here can the offset rules apply
    Many thanks in anticipation S&L

  25. S&L says:

    We have a rental property in the canaries which now costs us a fortune as it basically sits empty we also have rentals here can the offset rules apply
    Many thanks in anticipation S&L

  26. S&L says:

    We have a rental property in the canaries which now costs us a fortune as it basically sits empty we also have rentals here can the offset rules apply
    Many thanks in anticipation S&L

  27. S&L says:

    We have a rental property in the canaries which now costs us a fortune as it basically sits empty we also have rentals here can the offset rules apply
    Many thanks in anticipation S&L

  28. S&L says:

    We have a rental property in the canaries which now costs us a fortune as it basically sits empty we also have rentals here can the offset rules apply
    Many thanks in anticipation S&L

  29. Francesca says:

    The new tax return I received last week implies I can’t just deduct the rent a room allowance from my rental income (a lodger in my own house) and be taxed on that. This means that unless I make my expenses high I will be charged a hell of a lot more tax for being only £400 over the rent a room allowance. Any comments or suggestions. My lodger has just left and the room needs a lot of cleaning and sorting out.. I intend to do the work, including redecorating myself. What can I charge towards expenses on my own labour?!

  30. Greg S says:

    I own a flat in my name from before I met my wife. We now have children and my wife is a full time mum. How could I use he zero income to avoid paying tax in rental income. Would I have to transfer the deeds into her name? and what about the mortgage as its also just in my name?

  31. Tina says:

    For last 9 years I have been leting out a second property. I am not making any profit and the rent hardley covers the mortgage.
    Therefore I have not been declaring it as a second income.
    Do I need to declar it and if I do how can I go about doing it.

  32. David says:

    Hi, I am a landlord with 3 properties. If I also manage these properties by carrying out visits and doing maintenance, can I offset any expenses from say investing in a new vehicle that is used to carry out repairs.

    Thanks.

  33. susy says:

    ok the house we have a morgage on is too small for us,we need a bigger house,our family has extented a lot since we purchased .we were thinking of renting out our house and we go rent a bigger house..what do we need to do in order to do this and is it a good idea.

  34. Tricia B says:

    We have a 2 bed flat that we let out. We own our house (main residence) but need to let it out in order to move to another area in the country. Its our intention to rent a property for us to live in as the move may only be for a few years and eventually we will move back to our main residence. Are there any tax implications with our choice of letting out our home in order to be able to rent another for us to live in.

  35. Christine White says:

    What is the best type of mortgage to have for a rented property, given that interest is allowable against tax?

  36. Spike says:

    If my wife accepts a job overseas for two years, will she be liable for stamp duty on a property she buys in the uk during this period.
    Thanks

  37. kay says:

    if i have net profit of 25k howmuch can i put into saving?

  38. Eriksmum says:

    If we jointly own a property but I do all the “work” and all monies are handled by me, rent being paid into an account in my sole name, will both my husband and I have to complete self-assessment forms? Many thanks

  39. Bryan says:

    Hi, my wife and I rent out our old home. As the house is currently only in my name I assume the rental income in it’s entirety has to be added to my tax return? Also, as my wife deals with handling the rental property (over and above the basic services of a letting agent), would a reasonable payment to her be a permitted deductable expense? If so, is there a rule of thumb for what is considered reasonable?

  40. Justin says:

    Hi there I have several properties all mortgaged in my name, I bought these while I was married and my wife contributed to the deposit in all cases. Am I able to split the profit and/or loss 50/50 for the purpose of my tax return, or does the fact that I hold he mortgage and the property in my name alone negate this .

  41. 2loola says:

    I am thinking of renting my property out. Currently the total running cost of the house (inc utilities, internet, council tax and water and mortgage) is approx £900 a month. I will continue to pay all these bills and will include them in the rental charge. But ultimately I will not be making any profit. Will I still need to inform HMRC?

  42. imocat2 says:

    i currently rent my house out to an unemployed couple what happens if i lose my job am i still entitled to unemployment benefit

  43. mandy says:

    hi i pay the mortgage on my house but i dont live there. my two children live there and pay the bills. do i need to tell the mortgage company.

  44. Mike M says:

    I have recently moved back into a house I previously rented out and i am planning to sell it . Once the house is sold would I need to pay capital gains tax ? also is there a minimum amount of time I need to live in the house to avoid paying capital gains tax ? If there is any other information you can provide on this subject id much appreciate it . Thanks Mike

  45. Anon says:

    Hi, I own a flat which my mother lives in rent free, while I live with my girlfriend. Do I need to notify anyone as there is no rental income?

  46. J Cullen says:

    My ex husband kept our joint property on interest only without my knowledge for some time and had all monies paid into his account. Because the property was in joint name and the initial rental agency in joint name also, am I liable to pay half the tax on the rental he received even though I didn’t receive any monies from it?

  47. Kasey says:

    My nan currently rents her flat for £850 PCM but the tenants are moving out, I want to move in and she has said that I would only have to pay all the bills and council tax, as I’m pregnant with twins to help us out financially. So will she need to pay any tax?
    She owns 1 house converted into 2 flats which one of them I would live in and the other she rents out, she is retired. Please reply thank you

  48. philip bell says:

    how long do i have to live in my house before i
    have to pay tax on the increased value

  49. Doug says:

    My wife rents out a flat that she bought several years ago. One of the elements of finance for the flat was a loan from her parents on which she pays interest to them. Is interest on private loans an acceptable expense from a tax perspective?

  50. Mike says:

    My understanding is that the only thing that you can offset against tax is the INTEREST on the mortgage and NOT the full mortgage amount? This means you need to be able to seperate the Capital repayment from the interest payment (if you’re not on an interest only mortgage).
    Scenario 1
    My mortgage is £600 per month
    Lets say £400 is interest and £200 capital repayment.
    If I charge £600 per month rental then it covers the mortgage, but only £400 is interest (and is an allowable expense). The other £200 is “income” and therefore I should be paying tax on this. At 25% tax I earn only £150 or 40% £120 meaning I don’t cover the mortgage!

    There are many people on this discussion board stating there income is not matching the mortgage payments. However if it’s matching the interest section of your mortgage payments, from a tax point of view you aren’t making a loss. Can you confirm if I have understood this correctly please?

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