Landlord Tax Return

 

As a landlord what tax do I need to pay?

 

 

Although it may not seem it but as a landlord you are counted as being self employed and receiving income which isn’t taxed at source, therefore you would need to fill a self assessment tax return.

 

There are different types of landlord tax to bare in mind:

-          Tax on rental income

-          Stamp duty on land tax

-          National Insurance Contributions

-          Capital Gains tax

 

Please note that not all these taxes can be paid via the self assessment, you would only need to pay Capital Gains Tax and Stamp Duty Land Tax when buying or selling property.

 

Income tax and National Insurance Contributions are paid yearly and it is based on the income you receive from renting out your properties. To pay these you would need to file a self assessment and complete a tax return each year.

 

 

When do I needto pay landlord income tax through self assessment

 

The government have said that you are allowed £1000 tax free rental income tax allowance per year which you are able to claim in your tax return. However if you use the property allowance you wouldn’t be allowed to claim any allowable expenses therefore this is only useful if you have less than £1000 in expenses from renting out your property.

 

If your income from property is between £1000 and £2500 a year you need to get in touch with HMRC.

 

 

Do landlords pay national insurance on rental income

 

The government website has stated that you pay Class 2 national insurance if your profits are £6475 a year or more and renting out properties is your main job, therefore you are only paying national insurance if you’re running the operation as a business.

 

To be able to say renting out property as a business the following must apply:

 

-          Being a landlord is your main job

-          You’re buying new properties to rent out

-          You rent out more than one property

 

 

Corporation Tax for landlords

Some landlords choose to create a limited company to buy and let the properties in, this is mainly because the profits in the company are subject to Corporation Tax at 19% rather than higher individual income tax rates. However there are also more costs related to running a business.

 

How does the landlord tax return process work

 

1.       Register for Self Assessment, at Cheylesmore Accountants we can help to register you

2.       Stay on top of landlord tax deadlines

o   The deadline is the 31st January 2022

o   Once you have filed your tax return you need to pay the tax that you owe

 

3.       Sort your information

a.       Keep records of the dates you let out your property

b.       All the money you’ve spent

c.       All rents received

d.       Lease or letting contracts

e.       Rent books

f.        Receipts

g.       Invoices

h.       Bank statements

i.         Mileage logs

j.         Cost of vehicle used for property business

k.       All documents when you bought the property

 

4.       Work out Landlord tax deductions

a.       There are a number of allowable expenses for landlords such as

·  Property repair and maintenance cost

·  Replacement of domestic items

·  Accounting and letting agent fees

·  Landlord insurance

·  Running costs

·  Letting agent fees

·  Light and heating costs

·  Service charges

·  Ground rent

·  Cleaning costs

·  Advertising costs

 

5.       You would then fill in a landlord tax return

a.       You would need to tell HMRC about the following

·  Rental income and other receipts from UK land or property

·  Income from letting furnished rooms in your own home

·  Income from furnished holiday letting in the UK or European Economic Area

·  Premiums from leasing UK land

 

6.       Pay your landlord tax

a.       HMRC will calculate how much you owe and send you a tax bill

b.       It is important to pay your bill as soon as possible as you would incur penalties by missing the deadline

c.       If your bill is over £1000 you would also need to make a payment on account which is an advance payment towards your next Self Assessment bill

d.       You usually need to make two payments on account each year – one on 31st January and one on 31st July

e.       If your bill is between £32 and £30000 for your payment due on 31st January and you think you may struggle to pay you can use HMRC’s Time to Pay service to set up a payment plan where you will pay off the payment over 12 months.

 

For more information get in touch with Cheylesmore Chartered Accountants