Rental Income

RENTAL INCOME

If you are a Landlord and receive rental income in the UK then you will need to complete a self assessment tax return each year to declare your income. Whether you are a first-time landlord or a seasoned investor, the actual landlord tax return process is the same, and we can help you no matter how big or small your property portfolio may be. At UK Tax Returns we will prepare your accounts and liaise with HMRC on your behalf so that your tax affairs are always kept up to date.

We will guide you through the process and let you know about all the legally allowable tax-deductible expenses which will help to reduce any tax liability that you may otherwise have. There is often confusion as to when certain expenses are allowable, and so we can explain this to you clearly and concisely so that you are confident with your landlord tax return.

Our service provides essential bookkeeping when preparing your property tax return. We will collate your monthly rental statements and offer to liaise directly with your letting agent if you have one. We provide a simple and clear fixed fee service of £295 per tax return covering one property, and if you own the property in joint names then the second persons’ tax return will often be reduced to £147.

We have prepared a help sheet specifically for Landlords with rental income so please contact us today to request this help sheet.

We are professional intermediaries that work for you, not for HMRC. We can discuss a wide range of taxation and your specific areas of concern. We can also discuss scenarios that you are considering and hypothetical situations that make the best use of tax planning.

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Using a tax agent removes the general stress of trying to deal with a process that you may not 100% understand or be familiar with. Often dealing with the tax office can be daunting and confusing so we will act as an intermediary and explain everything to you jargon free.

As authorised partners of HMRC, tax agents are specialist companies who are experienced with the UK tax system – we understand what you can and can’t claim for in a range of specific situations, and our aim is always to save you time and money.

At UK Tax Returns we have special agent dedicated phone lines direct to HMRC tax office which are not available to the general public. We can talk to HMRC about your tax affairs very quickly at any point, and we can access specialist guidance from technical advisers within HMRC whenever the need arises.

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WHY USE A TAX AGENT? ​

Mortgage Interest Restriction

Since 2017 HMRC have changed the way that mortgage interest is calculated as an allowable expense against your rental income. There is a lot of mis-information out there, and some landlords believe that you can no longer claim any interest, which is not true. The ability to claim mortgage interest has been restricted and is being phased in over 4 years and will be fully in force from April 2020 onwards.

These changes have mainly affected those who are 40% or 45% taxpayers - those who have income over £50,270 in the current 2024/25 tax year. Due to the changes, tax has undoubtedly increased for landlords, but the outlook is not as bleak as some have feared.

These changes have caused a lot of confusion amongst landlords so please contact us to discuss any concerns that you may have with regards to the new treatment of mortgage interest; we can ensure that you are fully compliant with your landlord tax responsibilities whilst minimising your tax liability as far as possible.

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MAJOR TAX CHANGES THAT HAVE AFFECTED LANDLORDS IN RECENT YEARS​

Stamp Duty Surcharge

From April 2016 the amount of stamp duty (SDLT) paid on any property that will not be your main residence – so any Buy to Let properties, holiday lets or second homes, has increased by 3%. At the moment stamp duty on property increases in tiered stages depending upon the value of the property, and so from April 2016 all stamp duty brackets have increased by a further 3% on all second homes and investments.

This surcharge is certainly another deterrent for landlords. However, the good news is that under current tax laws you can claim tax relief on the stamp duty you have paid. When you come to sell the property in the future this will help reduce your Capital Gains Tax liability.

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Changes to Principle Private Residence (PPR) Relief and Lettings Relief

Until recently, there were two generous reliefs available to those who sell a rental property that was formally their primary residence. However from April 2020 onwards, major tax reforms have effected these two reliefs – please refer to our Capital Gains Tax section for more information.

If you are seriously thinking of selling your former UK home it would be beneficial to understand the impact of these two tax reliefs, and how CGT reporting has changed. Speak to us today with regards to our Capital Gains forecasting services.

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There has been a significant shake up to the Buy to Let property sector recently with announced changes affecting many private landlords.  April 2017 saw the introduction of an aggressive tax reform specifically targeting UK landlords – it has been estimated by HMRC that 20% of all UK landlords will be affected. With yet more changes still planned, it has never been more important to keep ahead with your property tax affairs.

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What happens if I make a loss in my rental business?

If you make a rental loss then you will not be liable to pay any tax to HMRC for your rental income for that specific tax year. It can often still be in your best interests to maximise the loss as far as possible by ensuring that you claim all of your allowable expenses so that the loss can be carried forward into the next tax year and used to reduce your tax liability, and your tax bill, in the new tax year.

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What is a personal allowance?

HMRC allows every UK resident to earn a certain amount of money each year tax free before any tax is due. For the 2023/24 tax year this was £12,570 per person, which will continue at the same fixed amount for 2024/25.

In addition to this, if you have made any Capital Gains where you have sold an asset for a profit then the first £3,000 of any gain is tax free for sales in the 2024/25 year.

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FAQS

If I own property in a joint name with someone else, do we both need to complete a tax return?

Yes, you will. If you own any property, sell any asset or work within a partnership with any other person then you will each need to complete a self-assessment tax return as HMRC needs to know about everyone’s personal circumstances. You must declare the rental income in line with your legal share of the property ownership.

When do I pay for your services?

In most cases you will be invoiced for our services after we have collected all of your income and expense figures for you, we have carried out the basic book keeping that you will need, and we have fully prepared your UK tax return ready to send this to HMRC. At this stage we inform you of your tax liability and how much tax you owe, or how much you are due back from HMRC. We will send you a copy of your prepared tax return for you to check and approve.

At this stage we will also send you our invoice; once our invoice has been settled and your tax return has been approved, we will submit your tax return securely online through the government’s portals.