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?
- Do I need to compelete a tax return if I rent a property?
- How much tax will I pay on my rental property?
- What expenses are allowable for renting a property?
- How long do I need to keep my expense information for?
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