Being a landlord comes with its fair share of responsibilities, and one of the most important ones is keeping on top of their tax commitments. With the self-assessment tax return deadline on the horizon, we’ve compiled some top tips for landlords to help make the process as smooth as possible.
What are the tax requirements?
When a landlord lets a property in the UK, the income they earn is subject to tax. This is calculated on the rental income after allowable expenses have been deducted. Allowable expenses typically include maintenance and repairs costs, buildings and contents insurance, and letting agent fees, among others.
It's crucial to keep a record of all these expenses, as they can significantly reduce a landlord’s taxable income and consequently, the amount of tax they need to pay.
Remember the personal allowance
Don't forget about the personal allowance, which is the amount of income a person is allowed to earn before they start paying income tax. For the 2023/2024 tax year, starting on 6th April 2023 and ending on 5th April 2024, this is set at £12,570. If the total taxable income (including from renting out a property) is below this amount, landlords won't need to pay any tax.
Top tips for the self-assessment tax return
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Start early
Don't leave it until the last minute. The earlier a landlord starts, the more time they will have to gather all the necessary documents and information. This will also give landlords ample time to seek advice if they encounter any issues.
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Keep accurate records
HMRC can ask to see a landlord's records up to six years after the tax year they relate to, so it's essential to keep accurate and complete records. This also makes it much easier to fill in the tax return when the time comes.
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Seek professional advice
If a landlord is unsure about anything, it's always a good idea to seek professional advice. Tax laws can be complex and getting it wrong can lead to fines and penalties, so don't hesitate to consult a tax advisor if needed.
Important HMRC deadlines
The deadline for paper self-assessment tax returns is 31st October, while for online returns it's 31st January of the following year. However, if a landlord owes tax and wants HMRC to collect it through their PAYE code, they need to submit their online return by 30th December.
Don't forget payments on account
If the tax bill is £1,000 or more, landlords might need to make 'payments on account'. These are advance payments towards their next tax bill, and there are two each year - one by 31st January and the other by 31st July.
Preparing a self-assessment tax return can feel daunting, but with careful planning and record-keeping, it doesn't have to be. And remember, if there are queries, it's always best to seek professional advice.
