How are landlords taxed for rental properties?

If you’re a landlord, it is your responsibility to pay tax on the income you receive from your rental properties.

Managing rental properties can be a lucrative full-time job, or a small second income, either way the profits you earn will be liable to income tax.

Income tax is due on your total profit once your allowable expenses have been deducted. Here’s a little more information about how to work out how much you owe.

What is rental income?

Rental income includes all payments that landlords receive from tenants. This is primarily made up of the rent payment, but can also include payments for services such as repairs to the property, utilities, parking space fees, and cleaning expenses.

What expenses can be deducted?

Landlords can claim back the cost of a variety of expenses associated with maintaining a rental property in order to reduce their tax bill.

Some of the most common expenses claimed by landlords include:

  • Council tax payments.
  • Gas, electric, and water expenses.
  • Letting agent’s fees.
  • Maintenance services including cleaners and gardeners.
  • Service charges.
  • Legal fees and accounting fees.
  • General expenses including phone bills and advertising costs.

How much tax am I required to pay?

The rate at which you are required to pay tax on your rental income will depend on your total earnings.

Income from rental properties is added to the income you receive from other employment. You then pay tax according to the income tax band that your total earnings falls into.

How and when is tax paid?

Landlords can either submit their tax returns by filling out paper forms or digitally online, online submissions have a longer deadline than paper ones.

To avoid receiving a penalty you are required to submit your tax return before the stated deadline. Up-to-date deadline dates and information about how to complete your tax return can be found on the government website.

Profits from multiple rental properties can be lumped together, unless any of the properties are based overseas, profits from overseas properties must be declared separately.

If you require any help or advice about paying tax on rental properties, get in touch with our team of experts here at Michael Bell by giving us a call on 01484 690 730.