Landlord? How to complete your Inland Revenue Tax Return

Do you earn income from letting out property?

If so, you may have to pay some tax on the income you make from your letting.  Here’s our step by step guide to helping you work out how you calculate your income and how you declare it to HMRC.

Work out your income

The first step when completing the property section of your self assessment tax return is to calculate your income from property.  Remember that however many properties you let out – whether it is one or a dozen – they will all be treated as a single business.

Work out your total gross income from residential lettings.  This is the total income you have received during the tax year.

Work out your expenses

As letting out property is classed as a ‘business’ (even if it is just one property), you are able to deduct a number of tax expenses.  The most common tax expenses you are allowed to claim are:

  • Repairs and maintenance to the property
  • Lettings agent’s fees
  • Council tax and utility bills (if you pay them)
  • Interest on a mortgage or home loan
  • Professional fees such as legal fees for lets of a year or less or accountant’s fees
  • Ground rent and service charges
  • Buildings and contents insurance
  • Cleaning or gardening services

You should remember that whilst you are allowed to claim tax expenses for maintenance and repairs, you are not permitted to claim for improvements to the property.

Work out your property business ‘net profit’

To work out your ‘net profit’, you deduct all your allowable tax expenses from your gross property income.  As we have seen, if you have more than one residential letting, you group all the income and all the expense figures together.

Completing an Inland Revenue Tax return for landlords

If you are an employee on PAYE and your net profit from property is under £2,500, you do not have to complete a self-assessment tax return.  Your tax code can be altered to claim the tax you owe.  You will have to complete HMRC form P810 every year.

If you are not on PAYE, or it your net profit from property is above £2,500, you will have to complete a self-assessment tax return.  If your net profit from property is under £68,000 you can group all the income and expenses as one figure on your tax return.

If your total income from UK property is over £68,000 (2009/10) or more in a tax year you must declare it on the property pages of your Self Assessment tax return and show your expenses separately.

Remember that you should complete your tax return by filling in the rents and expenses for the year they relate to.  It doesn’t matter when you actually pay and receive them.

12 comments

  1. Chris B says:

    Due to it wearing out, I have had to replace the roof on the property I let out. The roofer has been paid in this financial year but in order to do this I have taken out a 3 year loan.

    So can I confirm its OK to claim tax relief for the amount I pay in each of the 3 years the loan is being repaid.

  2. Ellie routledge says:

    My husband and I rent out our house but the rent we get each month doesnt cover the mortgage costs let alone repairs and insurance. I dnt work but he is on paye. Should we complete a tax return? Thanks

    • TaxFix says:

      Ellie routledge: You should let HMRC know that you are renting. There may be no tax to pay and if there is they might be able to adjust your tax code.

  3. Donna McClelland says:

    If i was renting a property for myself whilst renting out my own property can I add this to my self assessment?

  4. Julie Watson says:

    I rent out some property and usually fill in a self assessment property section. I have since also started a limited company. Do I still have to do the usual property self assessment and a different form for my limited company?

  5. Phil says:

    Hi, if I submit a self Assessment tax form (as being a landlord), is my gross income the total rental income? Or is it the amount after expenses have been deducted?
    I ask this as i am unsure of which figure to submit to the Student Loans company.

    Thanks

    Phil

  6. Sharon Kind says:

    I have used my own money to pay 25% deposit on a buy to let property. (currently have an offset mortgage so this has rocketed since buying the buy to let)

    Can I use this as an expense against the profit the inland revenue deem I have made on the rental, or can I claim for the extra interest I am now paying on my original loan

    thanks

  7. R Morris says:

    i am a PAYE my net profit after deducting Exspences & interest on my morgage from my rental income this year is less than £2500 net profit.
    But usually my profit is above the £2500 threshhold (this year due to a new boiler ext i have higher than usual exspences .
    can i still complete a P810 but send a cheque for the 20% Tax on my profit rather than have the Tax office change my Tax code & claim the Tax through my wages ?

  8. Mr Dacres says:

    when running a business from home how do you calculate your electric, gas and telephone bills for the business.

    • TaxFix says:

      Mr Dacres: Any expenses that you deduct for your business must be “wholly and exclusively” related to your business. If a situation arises where you run a business from your home and some of the expenses are both personal and business related. If you can separate the expenditure between business and private purposes, the business part is allowable.

  9. I Singh says:

    Can you claim interest relief on a loan used to purchase the a rental property, even though it is not secured against the rental property?

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