With London being the only place in the UK to escape decreases in property prices, more and more people are renting second properties, waiting for the property market to pick up. We have created a list of common questions and answers about the tax payable when renting your house or apartment and what expenses you can claim against:
Have I got to complete a tax return when I’m renting property?
If the income that you make from your property lettings is in excess of £2,500 within the tax year (April 6th, until April 5th of the following year), you will have to complete a tax return. In the event the rental earnings are below £2,500 and you’re working and pay income tax through PAYE, it is possible to speak to your local tax office to modify your PAYE tax code and you may not be required to complete a tax return.
What are the allowed expenses/costs for letting a property
When you rent a property, house or apartment, you are able to lower your tax burden through offsetting any permitted expenses related to the property.. These expenses might include:
+ letting agent’s, and lawyers/legal costs
+ building and contents insurance fees
+ mortgage loan interest
+ upkeep and maintenance -improvement expenditures will not be permitted
+ rent, ground rent and property or home service expenses
+ Local authority or council Taxes
+ Advertising and marketing your property to let
+ Additional fees for example telephone calls
+ How do you group my letting property costs?
When your earnings from your rental property is under £15,000 annually before deducting any allowable expenses, it is possible to group all of them as a individual overall total when you complete your tax return.. When your costs are over £15,000 you will have to group all of them individually and also complete a full tax return, not the shorter version.
How long should I keep my records for my rental property records for?
It is important to continue to keep any kind of records and information with regards to your rental property tax return for 6 years following the tax year for which that it was due.
Can you offset mortgage payments against property income?
You can deduct any interest only mortgage payments from your rental income, to calculate the profit that you earned from the property. Once you have deducted all allowable expses such as interest mortgage payments you will be left with the profit which you will be taxed on.
What time of year should I submit tax returns for renting property?
The deadline to complete a paper based tax return is 31st October. If you are complete your tax return online you are given three extra months to complete your return, with the deadline being 31st January. Make sure that you give yourself enough time to collect all your information that you need for your tax return.