Rental Income Tax Basics In UK , all rental income from letting properties is subject to taxation. This includes:
Income Tax: Calculated on the profit from rental income after deducting allowable expenses.
Capital Gains Tax: If you sell a property for a higher price than its purchase cost, you may need to pay capital gains tax.
How to File Taxes In the UK, landlords must report rental income to the HM Revenue & Customs (HMRC) accurately through the Self Assessment system:
Register for Self Assessment: If you don't usually file tax returns, you must first register with HMRC.
Complete the Tax Return: There is a dedicated section in the Self Assessment form to declare your rental income and related expenses.
Submit the Tax Return: Ensure you submit the form and pay any taxes owed before the deadline.
One advantage of being a landlord is that you can deduct certain expenses from your rental income, effectively reducing your taxable income. These include:
Mortgage Interest
Property Maintenance Costs: Like repairs, painting, cleaning, and gardening.Agency Fees
Landlord Insurance
Legal and Accounting Fees Remember, only expenses that are wholly and exclusively for rental activities can be claimed.
Capital Gains Tax When you sell or otherwise dispose of your rental property and make a profit, you may be liable for capital gains tax. This tax is based on the difference between your purchase price and your sale price.
