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.


402 comments

  1. Shirlee Beito says:

    If my son paid the mortgage for 10 months because my unemployment ran out, do I put this amount as rental income or other income

  2. Imran says:

    If I have a property which I don’t earn no profit from will I have to tell child tax credit department

  3. Catherine Brierley says:

    I inherited my brothers cottage worth £90,000 I have spent £50,000 on it as it was in a bad state. If I sell it will I have to pay tax on it as it cost me personally to improve it. I am 71 and live with my son.

  4. JoJo says:

    I am in the process of buying a rental property and am raising the monies against my main residence to buy the rental property outright. My understanding is that as I do not currently have a mortgage on my main home, and the mortgage I have applied for is purely for the purpose of buying the rental property I can offset the interest element of the mortgage against the rental income I receive for the property that I am buying. However, would this situation be altered if i re-mortgages (pureley to get a better deal) when my initial interest rate expires? Also what it the situation with regards to Capital Gains Tax? Would this have been effected if I had the mortgage on my rental property rather than my home? Or can the mortgage still be offset against the potential capital gain in the future if my rental property is sold even though it is secured on my home? Is there any advantage to the way that I have set up the mortgage on my main home rather than against the rental property other than the interest rate potentially being lower on a residential mortgage as opposed to on a buy to let mortgage?

  5. Mark says:

    hi,

    My ex wife has two properties solely in her name, bought during our marriage but she has never paid income tax on them. Can i be in any way held liable for the tax bill if and when the inland revenue catches up with her?

  6. Mark says:

    I am getting divorced and as a couple we have 4 properties. Two are in my wife’s name only. She has not declared the income and has not paid tax on it. Can I be held liable for the unpaid bill if/when it arrives? I am keen to tie up financials but do not want to rock the boat as investigations will reveal her non payment and the IR will become involved. I have my own income and have always paid tax through PAYE.

  7. Clare says:

    hi may sound like daft question, i currently have 1 bed flat on market if I rent it out till it’s sold will I pay tax on income from flat or will taxman add those earnings to current income from my job Which is 39k? I was lead to believe thst it would be seperate income and charged at different tax rate but having read some posts I don’t think that’s the case . I’m worried that I may well go into higher tax bracket if have that on top, as any money from rent recieved will be going towards renting a larger property so I won’t see any profit anyway??
    Thanks

  8. Arthur says:

    My elderley Aunt is having to go into sheltered accomdation, if we rent her house out can we offset the rent she is payiing aginst the rent she is receiving? Or is there some legal way to reduce tax liability on the rent she receives, bearing in mind she is moving on health grounds?

  9. debbie says:

    we are buying a house cash for our daughter and her partner to rent off us .Will we be able to do this

  10. James says:

    we are thinking of purchasing a second property as buy to let. Our mortgage is around £100 less than the rental charge per month therefore can we claim all the mortgage costs back?

  11. gary weston says:

    I have sold an annex which i purchased back in 1989 along with my current house as 1 plot. Do i have to pay capital gains on the sale of the annex, as i purchased them as 1 back in 1989? Can i use the money as a deposit on another property without having to pay capital gains?

  12. gill smith says:

    are there any tax implications i should be aware of if i buy a house for a family member to live in rent free?

  13. Anonymous says:

    My husband is a higher tax payer and rents out a mortgage free property. I am a lower tax payer – is there a way we can transfer the property on my name to save on the tax we pay end of each financial year?

  14. Tangoe says:

    Hi TaxFix,

    I bought a property many years ago, which I am now renting out. It is also now freehold. I want to remortgage it in order to help my daughter buy a house. I bought the property in my sole name, however I now want to have it in both mine and my wifes name. Is it possible to reducde our tax liability by offsetting expenses after the remortgage?

  15. steve says:

    If my wife owns a house can she let that house to my employer for me to live in?

  16. steve says:

    I have just purchased 7 dehumidifiers for 7 of my houses i rent out, am i able to get tax back on them or not?

  17. unsure says:

    I have a second property and would like to help some friends out by allowing them to live rent free in that property.

    A) can I do this?
    B) if so, how long for?
    C) Is it legal?

  18. Rod Crisp says:

    My wife and i jointly own a property that we are about to let. On our self assessment tax returns should we show equally, rental income and allowable expenditure?

  19. georgie m says:

    Hi, we are thinking of buying a flat to rent out (and future retirement), we will raise the money through re-mortgaging our family home. Are we able to claim the interest payments back against taxable income on new rental property?

    Many thanks

  20. Brian M W says:

    I recently inherited a property after my parents, (approximate value £160k), and being aged 60, I decided to take early retirement, and renovate the property with the intention of renting it to my son. My personal pension is £5,800. My wife is still working, and has a salary before tax of approximatly £36k PA. We were going to rent the property to my son and his fiance’e for £4,000 PA, on a rent to buy basis, at a concessionary price; using the income to boost our pensions, and allowing my son to purchase a property that he would otherwise be unable to afford. It has been suggested by friends who own several properties, and are more versed in these matters than us, that it may be better for tax purposes to seperate the rent into two seperate payments, one to my wife of £2,500 and the other to me of £1,500. This would keep my income below the £7.5k tax level for retired persons under 65 year’s, and the £2,500 paid to my wife should not affect her working tax allowance? Are they on the right track with this suggestion?

  21. john s says:

    if i move into my rented house to live can i over come the capitol gains tax after a time?

  22. Jo says:

    Hi
    I am considering buying a second flat as a buy to let. Have 2 questions on this.
    1. I have a mortgage on my first flat – would it make sense to decrease this mortgage and take a higher mortgage on the second property so I can write off interest?
    2. My partner doesnt work. Would it make more sense for him to receive rental payments, since he doesnt pay tax. For this, does he need to co-own or fully own the property?

  23. Carol E says:

    We have just submitted our first self assessment as we have a house we let for holiday hire in UK.
    Total income was just over £20,000, but total expenditure was just over £50,000, broken down to £24,000 actual expenses and the remainder was repair of the swimming pool damaged by early residents. So, theoretically, even not including the repair, we still made a loss, which is fine, for it is small enough for us to keep the house rather than sell it. This was divided between my husband and I, so my liability was £10,000 income and £12,000 expenditure.However, I have now received a tax coding notice stating HMRC they will include forecast £10,000 income from property, thereby wiping out my tax allowance from my work and charging me nearly £250 per month tax!! It seems they are not including expenditure, therefore treating income as net income! Surely this is not right? If it is, why does anyone hire their homes, and we will have to get rid of ours!!!

  24. john says:

    hi i have a rental property which is just about covering itself payment wise but if i decide to live in it as my wife and i may be seperating does this mean i would then be classed as the inhabitant and would it cancel capitol gain tax if i decide to sell in the future??

  25. john hart says:

    Hi,

    My wife owns a house in her sole name, before she sells could see gift me 50% of the property to enable my CGT allowance to used aswell as hers

  26. ashok says:

    I am living in house with my friend,that is on mortgage with 50/50 share .Now he wants move out and going to put on rent .I don’want any body else come in my house.Is it leggally he can do or not.

  27. Darren says:

    I have had a rental flat for 5 years and the value has gone up £100k in the time. I moved back in 6 months ago and it is now my main residence. I have now bought the flat next door and am knocking through to make one large flat as my main residence for at least the next 5 years. Do I have ever have liability for CGT on the time it was a rental?

  28. joe says:

    got tax code fixed, why have i not got the tax i overpaid back??

  29. Caroline D says:

    Hi. I bought a BTL property end March 2011. I purchased this outright using an increased amount against my residential mortgage. Can I offset these monthly payments against any profit?

  30. Joe says:

    Hi,
    We have 2 properties rented out, last year we added a third property which needed some work to make habital. The intention was to repair it and rent it out for 6 months to a year and then move in ourselves. Unfortunately the work has increased and taken longer than anticipated to complete and we may be unable to find a tenant who would want to rent for 3 months. The question is, can we still claim tax relief on interest and the maintenance work etc?? Any advice apreciatted. Thanks, Joe

  31. Steve says:

    I have recently rented out my mum’s house. In order to make it habitable I had to get someone to renew the roof. Can I claim this and the guttering etc against my 2012 tax return?

    Cheers

  32. Phil M says:

    I have a second property which has a mortgage greater than my rental income, the mortgage is part repayment, part endowment. Will I pay tax on the rental income even though I make NO profit

  33. imz says:

    I have portfolio of 4 properties with all of them having a buy to let mortgages. The rental income barley covers the mortgage repayments. Aim I still required to pay any tax.

    Cheers

  34. peter says:

    If I share the rent 50:50 do I also have to share the expenses 50:50 or can I attribute them differently? (I pay higher rate tax but my wife does not)

  35. Lord Greene Land says:

    Hi.

    I have started letting my property. Can you tell me please if I am able to claim the mortgage interest I have incurred as an expense for the 4 years I have lived there prior to letting.
    I also purchased a share of the freehold for the property for £5000 and own this jointly with the other 3 flats. Will I be able to claim this as an expense.

    Many thanks, LGL

  36. Anonymous 101 says:

    I bought a flat in 2003, in 2007 I increased the mortgage to purchase a separate buy to let. In 2008 I moved from the property and rented it out. I have since (Dec 2010) sold the property and wonder if I will have to pay CGT? If so, on what figure – original purchase price or profit made since increasing mortgage?

  37. lawrence says:

    if EU person buy a home to rent no morgage attached. Does he have to apy tax and if yes how much?

  38. Chris says:

    I have recently inherited a property which I intend to rent out. Can I transfer ownereship of the property to one of my children who is a student and does not pay tax or to my wife who is a standard rate tax payer.

  39. Kev says:

    5 years ago my father died and left half of his and mums estate to me. I used this money to buy a house that my mother lives in. I charge her a rent for the house which I pay income tax. What if any would be the consequences of letting her live in the house rent free

  40. Steve says:

    I am currently living in Army Quarters, but have bought a house in which I am having to now let for a year before I can move in. I have been told different stories about tax returns. Some have said I have to fill one in and others are saying that I don’t have to because the Married quarters are tempory accommodation. which one is true?
    Thank you

  41. Pat Millar says:

    I have jjust started renting out my house (Jan 2012). I presume I have to fill out a self assessment tax form but when do I have to do this?

  42. jo says:

    I work full time and pay tax on my wage but I also have a property that I rent out. However by the time i have paid for the morgage and for jobs like the boiler and electricity to be changed and serviced i have actually lost money on the house. Can I claim any tax back from my normal wage?

  43. Allen A says:

    I am going through my income/ expenses for my nuy to rent and the balance is approx

  44. jill says:

    I am 16 and want to move out of my mums house when turn 17 I’m going to further education and want to know will she still get maintence money even though I am not living with her.

  45. G Clark says:

    My wife and I jointly own a flat which we rent. She is a lower rate taxpayer. Do I have to divide rental income/profit equally or can I agree that she receives say 99% . If so presumably she would also have to receive the profit in an account in her name. Should I record this in a partnership or other type of agreement.

  46. Diane says:

    Does anyone know if you can let a property to family?

  47. Si says:

    Hey. This may sound bad but totally didn’t realise when me and wife. Now x wife changed mortgage in 2007 to btl and bought another place to live in. We are divorced and she is living in 2nd home with new partner. I rent myself and it was agreed she had 1 house I got the other. My name is solely on the landlord but both on deeds. Is she entitled to half even though I’m on as landlord only. Also what would be penalties and likely tax to pay on a rented thousand pound a month place. Need to get advice as we are now doing the divorce money bit and houses are being put in pot. Thank you in advance. Si

  48. damy says:

    hi i have just bought a house to live myself but apparently i will have to move out of the town to another town due to job and i will have to rent my house. i myself will be living in a rented house. do i need to declare the rent received as an income and is it taxable? thanks

  49. Robert says:

    I inherited a house which is my name. The rent is payed into joint account. I am on high rate tax. Can my wife claim the revenue as lower tax payer

  50. Dan says:

    I rent a property out. The mortgage I have on that property is interest only. For the purposes of my tax return is it correct to include all of that cost in the return as an allowable expense?

Leave a Reply