There are many obligations, which as a landlord of residential property, you are liable to carry out. This blog will focus on discussing two core obligations, that as an expert in property and taxation, I encourage you to carry out.

Landlord Registration

All local councils have a landlord registration department and before you rent out any residential property, you should register with the appropriate council. Details can be found on your local council’s website. There are additional requirements for HMOs (House in Multiple Occupancy).

The Scottish Government is currently undertaking a consultation exercise, seeking views on expanding the information provided by those who apply to be a registered landlord and on changes to the current application fee structure. Meetings are being held throughout the country, with one being held on 11 May 2018 in Kilmarnock. To reserve a place you can contact the Landlord Registration team at housing@east-ayrshire.gov.uk.

For more information on the consultation exercise and events in other locations across Scotland please see consult.gov.scot/landlord-registration/registration-fee.

Taxation

Many people I have spoken to don’t realise that they have to declare their property rental income to HMRC and pay the resultant tax. The amount of tax depends on the level of the profit and your personal circumstances.

Profit is calculated as income less allowable expenses* and you need to declare this to HMRC via a self assessment tax return if you have income of:

  • £2,500 or more after allowable expenses, or
  • £10,000 or more before expenses;

If your income is under these limits then you must still advise HMRC by writing to them.

Generally, property income should be declared by the person whose name is on the title deeds. If title is held jointly by married couples or civil partners living together the income will automatically be split 50:50 unless a formal election is submitted to HMRC. If title is held jointly by any other people, the income is split in the same proportions as the ownership.

*Expenses you can deduct include:

  • General maintenance and repairs – but not improvements
  • Mortgage interest – changes to the level of relief to be phased in over the next 4 years
  • Council tax, gas, electricity, insurance
  • Maintenance contracts for heating systems etc.
  • Letting agent’s fees and management fees, tenancy renewal fees
  • Landlord registration fees
  • Telephone calls – the proportion relating to the letting activity
  • Motor expenses – the proportion relating to the letting activity
  • Replacement of domestic items
  • Accountancy fees

It is vital that you consider your circumstances in relation to both of these areas. It will make arranging your finances and cash flow much simpler in the long-term, and importantly ensures you are complying with the current rules.

If you are unsure about what this means for you, or would like to discuss any of these points further, please get in touch with me here, or:

karen.morrison@campbelldallas.co.uk
01563 536 319

The information in this blog should not be regarded as financial advice. This is based on our understanding in April 2018. Laws and tax rules may change in the future. Campbell Dallas is not responsible for content contained on 3rd party sites.