A Life Less Taxing For Landlords

A Life Less Taxing For Landlords

HMRC Issue Landlord Warning

With the new tax year already here the HMRC have repeated the warning that they are cracking down on tax evasion by UK private rented sector landlords,

All PRS landlords who own residential rental properties are being advised to register for self assessment, if they haven’t done so already.

The self assessment annual tax return covers the period up to the 5th April each year, and needs to be filed online by no later than the following 31st January.

In order to calculate the tax owed by a landlord, the rental income must be added to any other taxable income that the landlord may earn, including wages from employment. The rate of income tax that HMRC will charge will depend on the landlord’s total income for the tax year.

There are a number of expenses that landlords can offset against their tax liability for rental income, including;

  • Interest payments on the element of mortgage or loan used to purchase the buy to let property,
  • Costs for repairs including materials
  • Maintenance including plumbing, gardening gas safety checks pats testing etc 
  • Like for like replacements such as double glazing for single glazing
  • Utility bills
  • Buildings and Contents insurance
  • Council tax 
  • Lettings / Property Management fees
  • Accountancy fees

However any work done on the rental property that is considered by HMRC to be improvements that increase the rental property’s overall value are not tax deductable

There are also some additional costs which can include anything involved with the letting of the rental property such as phone calls, advertising, travel to and from the property and stationary costs.

If a property is offered for letting to tenants in a furnished condition, landlords can offset 10% of the annual net rental income for normal wear and tear of the furnishings provided.

The Landlords Energy Saving Allowance (LESA) is a deduction for income tax purposes when energy efficiency investments are made to rental properties. It is open to all landlords who pay income tax and who let residential property in the UK private rental sector until April 2015.

Tax relief is for a maximum of £1,500 (GBP) per property.

All UK PRS landlords need to examine their finances and note what they have spent over the last year, be organized and keep receipts of all transactions concerning their rental properties, including any repairs and make sure they have the corresponding and relevant documentation to support their financial spending.

It is also a good idea to set up a separate bank account for the rental property income and expenditure as this will make life easier, allowing landlords to track their rental property spending using bank statements.

UK landlords need to remember that good record keeping is a key factor so they are advised to keep all receipts no matter how small, because they all add up.

Read more on saving tax here or visit our tax advisor directory listings to make contact

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