Tax Return for UK Rental Property


With house prices decreasing, more and more people are choosing to rent their properties until the market picks up. We have compiled a list of some of the most common questions about renting your property and tax returns:

Do I have to do a tax return if I am renting property?
If your profit from rental property is over £2,500 in the tax year, you will need to complete a tax return. If the rental income is below £2,500 and you are employed, you can contact your local tax office to adjust your PAYE tax code and you will not need to complete a tax return.

What are allowable expenses for renting a property
If you rent a property you can reduce your tax liability by offsetting any allowable expenses. These could include:

  • letting agent’s, and lawyers/legal fees
  • building and contents insurance costs
  • loan interest
  • 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 do I group my rental property expenses?
If your income for property rental is below £15,000 a year before any expenses, you can group them all as a single total on your tax return. If your expenses are above £15,000 you will need to group them separately and complete the full tax return.

How long do I need to keep my rental property records for?
Make sure that you keep any records relating to your rental property tax return for 6 years after the tax year for which it was due, whether you completed a tax return or not.


393 comments

  1. kelly says:

    I am having tenants moving into my property, however, the rent does not cover my mortgage and I pay rent for the accommodation that I live in now. Therefore , making a loss and no profit at all. I pay for insurance on the property and had a unsecured loan to contribute to the expense of purchasing the property. Both me and my husband works. Can you please advise me what action I need to take if any?

    • TaxFix says:

      kelly: Are the mortgage interest of the rental property and other allowable expenses greater than the rental income? If so then there will be no tax to pay. You might want to check to make sure you have calculated everything correctly.

  2. Gareth says:

    Last tax year, I moved out of my flat (which was formerly my primary residence) and rented it out. I now have to fill in a Self-Assessment for last tax year.

    While I was living in the flat I had to carry out a number of repair works to the property. We replaced the windows and got a new central heating system installed. We also had to furnish the flat and buy white goods such as fridge, washing machine etc.

    Are any of these items tax deductible within my Self Assessment, even though the modifications were performed and the appliances bought before I let out the property?

  3. Charles F-B says:

    Hi,
    The lady that I employ part time as my bookkeeper and manager has put a proposal to me.
    She wishes to live in a particular house in my portfolio; it is a big property with a very comfortable space suitable for an office and a workshop.

    She propose that I allow her a contract on a peppercorn rent, in consideration that I take responsibility for her own house and what ever rent I can achieve from it. She also propose to allowed me full access and use of the office and workshop at my property.

    Her property is likely to attract about the same rental value as my one would, her’s is only around 10 years old and in a very well maintained condition, I don’t envisage too much in the way of abnormal maintenance costs. It is a desirable from a tenant demand.

    The gain to me of the use of the office and workshop space would really be very useful and of value to me.

    My question is what tax implications might there be on each party, she has no mortgage on her place; she is currently entitled to and receives working tax credits.

    1, Would the taxman view a peppercorn rent as some kind of gift to her or similar and tax her on what the full rent would be?
    2, Or as she’s wont be getting the rent from her place will the taxman view this as some kind of avoidance or otherwise tax her as if she did receive market value rent?
    3, If so would it also be treated as income and like wise effect her current tax credit entitlement?

    4, I guess if I took a long lease on her place and then rented it out, the income and expenditure to me would be treated as normal and just the same as rent and expenses on the properties that I own.

    I have heard of some tax relief being offered to landlords for types of free rent, and I know that certain types of employment like farm workers also live-in employees

    Can you see any tax gains or losses to either of us if, or what guide can you give to facilitate the best achievement of something along these lines.

    Regards Charles

  4. vanessa says:

    my mother has passed away, do I have to pay council tax on her empty property after 6 months if it is not sold by then.

    • TaxFix says:

      Vanessa: There’s no Council Tax to pay on empty and unfurnished homes for up to 6 months. After this, they may qualify for a discount of up to 50%, depending on your council. It’s up to your council to decide how much discount they give. If the owner of a house has died, Council Tax isn’t charged for up to 6 months after probate is granted (your legal right to sell the home).

  5. JJ says:

    My wife and I are about to rent our house out, unfurnished. I earn over £50K p/a and my wife only works part time so if we were to put the tenancy agreement solely in her name will this reduce the tax payable on any profit we make.

  6. T Walsh says:

    We currently own two properties which we let out. When we bought these properties a few years ago we increased our mortgage on the property we live in as a deposit to buy the other two properties. Each year we do our self assessment online and put down the mortgage costs for the two properties. However, our own personal mortgage is quite high as a percentage of it is for the other two properties. We have never claimed for this extra cost of our mortgage. Are we able to claim on the part that has been used for the deposits and if so, can we also claim for previous years?

  7. Ian Evans says:

    Hi there,
    My mother owned an ex-council house and put it in mine and my 2 brothers names about ten years ago.I decided to buy it fully and so raised £50,000 on my current property to give them £25,000 each. I now rent it out. How can I prove or show hmrc that my increased payments are to pay my brothers and so be able to claim mortgage interest as an allowance against my rental income? thanks

  8. pauline says:

    I am investigating selling my solely own main UK res and jointly buying with my partner (not married) a joint main res which has an annexe. We’d then look to rent the annexe (not to family). If the mort interest payments on the COMBINED property is more than the rent on the annexe is that okay ie no tax then due on it? Also the new house would be mainly mine (equity split 80/20). I hope that the mortg/solic can make that official. And if so I assume I’d get taxed for 80% of any tax liability on the annexe (in the event we did make a profit after expenses). I’m 40% tax payer, so not good initially but later on I might stay at home with our child for a bit so assume I’d benefit then as prob a 20% tax payer. All hypothetical but trying to get a feel before we go any further. Pauline

  9. Ivor S says:

    Self Assessment: We are retired and rent a furnished room in our own home on a weekly tenancy basis that generates a few hundred pounds more than £4250pa. We also let out 2 furnished flats one in West London and one in Liverpool, each with short-hold tenancy agreements. As these are 3 essentially different “sources” of rental income; Can Rent a Room allowance be claimed for the “own home letting” in the aggregated rental income as part of the Self Assessment Property submission? All gross income from all sources is under £15k. The HMRC ‘Own Brand’ software we use no longer subtracts RARA automatically, so is it correct (if it is allowable) just to take £4250 (or £2125) off the aggregated figure before filling in the form on line? Note we always check the RARA box with an X but do not see any allowance made in the final computation Confused of Ealing!

  10. Mr williams says:

    I am thinking of renting out my house that i have bought (no mortgage)
    the rentable income i.e

  11. Tedd says:

    We have a rental property which we have only made a profit once in the last twelve years of 1300 GBP in 2009/10.Unfortunately we didn t file any tax returns because we have been overseas for the last 6 and assumed we did not need to pay any tax.We normally privately let but have used a letting agent and they have passed us numerous amounts of paperwork which discusses NRL and the need to file etc. what should we do please? What would likely penalties be if we approached HMRC? We have not been deliberately avoiding tax, as discussed only one in twelve has made a profit!thank you

  12. Carol says:

    Hi, I own some rental properties jointly with a friend. Our children want to earn some money (15 years old). can we pay them to paint the houses and do some cleaning on change over of tenants and still claim a tax deduction? They are not tax payers. (We would pay by cheque and would be bale to see it go into their accounts etc)

    Thanks

  13. maria says:

    I set up a small business (more of a hobby) last march and only have 6 to 7 entries in my accounts for the last tax year. Do i need to compleat a tax return for this or can i add it to next years set of accounts???
    Thanku

  14. jay says:

    I am looking to rent my property! I want to let the tax office know about this but im worried they will alert my mortgage company! I will not make hardly anything on the rent but if i inform the mortgage company the rates will rise? What should i do as i cant afford to pay extra just to rent

  15. Peter Dobson says:

    I tried to sell my house to buy a Park Home. When it didn’t sell I rented it out. I took out a loan aginst my former home to pay for my park home. I have paid off all except £3,500. It is listed as a “Buy to let mortgage” on my old home. Can I claim the fees I pay aginst tax on the rental income?

  16. Brian says:

    I rented my property through letting agent who is charging me 10% + VAT for management fees. Since I am busy with day job. I let my wife to deal with any issues from the letting agent.

    My wife deal with phone calls/ email,getting quoatation, arrange for people to repair, sometime she travel to the property and look into the issues by herself.

    She charge me a consulting fees of £300/month for phone calls and admin /dealing with letting agent.

    She also reimburse from me any repairs / painting / travelling cost separately.

    Please confirm if all the above is allowable for tax deduction. If not why?

    Thanks
    Brian

  17. Barry says:

    I have a second property that my daughter (a student) is living in at zero rent. Can she rent out the spare rooms and make use of the income and if so who is liable for any income tax. She has no other income. Can she used the rent a room scheme?

  18. Anonymous says:

    I am currently going through a divorce and renting out the former matrimonial home. The mortage is in joint names, however only i will receive income from the let as part of the divorce negotiations. Will my Ex be liable for tax ?

  19. H Parker says:

    I took out an interest only mortgage against equity in my property to buy a smaller house to retire to. Have been unable to sell my original house so with permission of the Building Society have gone to rental and am paying enhanced interest rate. My intertest only mortgage repayments are greater than rental income from tenant. What are the tax implictions for me please as will presumably need to declare next tax year. Thank you

  20. Gerry ~Q says:

    I am on the deeds on my husband, brother and sister in laws rental property. I do not receive any money from the property as it goes into a joint account of my husband and his brother. Do i need to still complete a tax return on these properties if I don’t get any income from them?

  21. Hadi Hosn says:

    I bought a property in London around April 2011 with a loan I received from a family friend because I couldn’t get a mortgage as I wasn’t in the UK long enough.

    So now, I receive regular rental income from the flat and pay off about 70% of the rental income back to the person who lent me the money, I am therefore repaying the loan – but the loan is a family loan and has not been done through a bank with the paperwork and all. I don’t have any of that.

    Am I still liable to pay tax on the full rental income I receive before paying back the loan or can I file taxes only on the leftover sum after I have paid back the loan?

    Any help whatsoever is greatly appreciated. Thanks a lot.

  22. john Slack says:

    my wife nad i are in business together as property developers.
    Can i put more of the profit in her name for tax purposes.
    We are both over 65
    we already let one property but if we let another it will take me over the tax allowance

  23. Max Morton says:

    If I let my property but then rent another property to live in myself can I offset against the income from my own proprty

  24. hadih says:

    Hi, I bought a house in April 2011 which I am currently receiving rental income from. However when I bought it, I had applied for a mortgage and got declined because I hadn’t been in the UK long enough :( so ended up taking a loan from a family friend, which I am paying back on a monthly basis from the rental income. Do I have to pay tax on the full rental income prior to paying back the loan or would the loan repayments be considered expenses?

  25. clive says:

    my wife and I own two flats which we rent.Must we both fill out tax returns each,splitting the income50/50

  26. Steve M says:

    My Mum died earlier this year and has left her house to my brother, sister and myself.

    My brother and sister aren’t interested in selling the house for a few years, so are letting me rent out the house in the meantime.

    As I pay tax at 40%, I’m thinking of letting my wife do all the renting, so in effect it will be her business.

    Does the house need to be transferred into her name, or can you still rent it out while it remains in my Mum’s name?

  27. lymby says:

    my wife and i our thinking of renting out a room in our house. im self-employed a low earner and claim carers allowance for my wife. she is on non means tested benefits.the house is in her name only. should i add the rent to my income,we would lose carers allowance.or could it go under as my wife’s income? and would she need to fill out a tax return the yearly rent would be just under 4250 UK pounds would it affect her allowances?

  28. Sara says:

    Hi I am about to rent my property out for £650 pm, my mortgage is interest only and by the time I include all the other expenses I pay out on it per month it equates to £647 pm. Can I include on my expenses a loan that I took out to make improvements to the property, to paint and make fit for living in? If yes then this would mean I make nothing off the flat and in fact the flat costs me £847 pm, would I still have to do a tax return?

  29. Iona Caldwell says:

    We are living abroad for 3 years. My husband is on a British contract whilst working abroad. I am not working. We own two properties which we are renting whilst we are abroad. One of the properties is solely owned by my husband. How do we report on and pay the tax we owe in the UK for them.

  30. Sue says:

    I have taken out a remortgage on my own home (interest only) in order to buy a rental flat. Can this be offset against tax?
    Thanks

  31. claire says:

    my husband his brother and father own a garage which is leased out they share the rent 3 ways i do not pay tax if i had our share would that stop my husband paying 40% on the small amount we get?if i could declare as mine it would save £3000 a year

  32. KC says:

    Hi I have a property on a buy to let mortgage interest only, I also have an unsecured loan on this property. However my question is that I have rented this property for the last six years but have not declared it. I am not making any profit from the rental income as I am having to pay money out of my own pocket to make the montly mortgage payments what should I do???

  33. Caroline Mayer says:

    Can I put mortgage endowment payments against rental income?

  34. kk says:

    can i rent my second home which has a residential mortgage and do a tax return

  35. Jeff D says:

    Can you put a AST in place and then raise a mortgage on the property and offset the interest only part of the mortgage or does the mortgage need to be in place 1st?

  36. david mark says:

    I purchased a 2nd house 4 years ago for £125,000.
    It has been rented out for the first 3 years and empty for the last year whilst I have been doing work on it. I have got planning permission on the garden and have know put the house up for sale at £125,00 and the garden plot for £65,000. If i sell either the house or garden plot how is capital gains calculated. Ie if i sell the house first for what i paid and then held onto the plot.

Leave a Reply