If you make a sizable sum of money from renting out a home, you must submit a landlord tax return by the 31st of January every year.

To file your tax return you first need to register yourself for self-assessment.

Typically, you must register for self-assessment by 5 October of the tax year following the one in which you began earning rental income if you haven’t previously done so. HMRC might fine you if you don’t register by the deadline.

You should receive a Government Gateway user ID and password when you register. You can do this to create your own tax account, which enables online tax management.

Once registered, you can complete the Self-Assessment tax return form online or on paper to file your tax return.

For each financial year, the due date for filing your tax return is typically 31 October for paper tax returns and 31 January for online tax forms. Therefore, the due date for paper tax returns is October 31, 2022, and the due date for electronic tax returns is January 31, 2023, for the tax year 2021–2022 respectively.

You must then pay the tax you owe after filing your tax return. The deadline for paying your 2021–22 taxes is 31 January 2023, which is also the final day for submitting online Self Assessment tax forms.

Information needed for Self-assessment

You’ll need information on all of the income you earned during the tax year, as well as details about any expenses you want to write off, in order to complete your tax return.

It’s critical to maintain track of all your earnings and outgoings so that you can quickly locate them when it’s time to complete your tax return.

HMRC needs the following details from you:

 All rental income received

 all money spent on allowable expenses

 the duration for which you rented out your property

Additionally, you will need your UTR (unique taxpayer reference) number, which is given to you at the time of Self-Assessment registration.

There are several expenses that landlords may deduct. These can be subtracted from your overall taxable profit.

Some of the main allowable expenses are:

 Accounting and letting agents’ fees

 Landlord insurance

 Replacement of domestic items

 Property and maintenance costs

 Running costs

Landlords in the UK must complete the UK property part, where you will inform HMRC of:

 Income from furnished holiday lettings in the UK or EEA

 Rental income and other receipts from UK land or property

 Income from letting furnished rooms in your own home etc.

Your tax bill will be calculated by HMRC and sent to you. The postal service will issue you a charge if you send a paper return.

Your Unique Taxpayer Reference (UTR) number followed by the letter “K” is your payment reference, which you’ll need to pay your bill.

As soon as you can, pay your bill since there are consequences for failing to do so by the due date.

You must additionally make a payment on account, which is an advance payment towards your subsequent Self-Assessment cost if your bill is more than £1,000 in total.

Normally, you are required to make two account payments every year on the 31st of January and the 31st of July.

MAKING TAX DIGITAL

It is necessary to begin the transition to digital software, which enables you to manage your finances, be proactive, calculate your tax liability in real-time, and spend more time focusing on your business.

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for Making Tax Digital for Income Tax from 6 April 2024.

In a live pilot to test and develop the Making Tax Digital service for Income Tax, certain companies and agents are already maintaining digital records and sending changes to HMRC. You can voluntarily use software to preserve company records online and transmit Income Tax updates to HMRC if you are a self-employed firm or landlord instead of completing a Self-Assessment tax return.

It is essential to take action as soon as possible if you have not yet filed or paid your 21/22 tax return, whether that be by filing and paying or by contacting HMRC through Time to Pay.

INCOME TAX INVESTIGATIONS

Cheylesmore Chartered Accountants can assist if you becomethe target of an HMRC income tax investigation and require professional counsel.

HMRC typically uses a Section 9a enquiry, also known as an income tax investigation, to determine whether someone’s tax affairs are in order.

Section 9a inquiries aren’t typically carried out at random; instead, HMRC usually opens an income tax investigation when it suspects that there may have been a tax underpayment.

In certain situations, HMRC has the authority to investigate tax issues going back up to 20 years. A tax investigation expert will be able to control the situation and advise on the best course of action.

You'll need as much information on hand as you can to support your claims. This frequently includes

information about revenue and expenses, such as bank account statements and invoices for

purchases and sales.

It goes without saying that your viewpoint will be stronger the more knowledge you have. You or

your advisor will be immensely helped in successfully defending against an investigation if you have

access to comprehensive and reliable information.

Please refer to our previous article on tax investigations to get more information about it.

XERO for rental property

How can Xero help manage your property finances?

Xero helps to manage cash flow by tracking rental payments, security deposits, and expenses to help show the ROI across your property portfolio and keep financials neat and tidy. It helps to keep up with the expenses by snapping receipts and bills on the move to help stay on top of expenses.

Along with that, you don’t need to keep separate information for your tenants since ,via Xero, you can look up tenant information to see a full history of rent, emails, invoices, payments and all the contact details.

You don’t need to worry about storing important documents as Xero manages and shares documents, bills and all the receipts digitally.

With HMRC-recognized software, managing all of your property finances in one location while remaining compliant is excellent for landlords.

Real-time financial tracking for your property is simple. On your dashboard, you may view your revenue from rent and deposit payments and your outgoings from costs and bills.

Beginning in 2024, the MTD ITSA modifies how tax returns are sent to HMRC. You can ensure compliance with Xero’s assistance.

To efficiently handle rent collection and make it simple for your tenants to pay you, connect Xero to GoCardless.

Contact Cheylesmore Chartered Accountants for more information about landlords and self-assessments.