As leasing of residential properties is becoming ever more popular within rural businesses, it is important that landlords are aware of their property tax obligations. A landlord must register with the council for the area in which the property is situated and ensure they advise HMRC of the income received, either via a tax return or a letter.
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 the council’s website. There are additional requirements for HMOs (House in Multiple Occupancy).
Property rental income must be declared to HMRC and resultant tax paid. 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 – but changes are in place
- 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
For further advice on the tax aspects of renting out properties, please contact your usual Campbell Dallas advisor or:
The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.