If you're a Landlord in the UK you will need to file a tax return with your rental earnings as with any other business. Over the past few years the HMRC, HM Revenue and Customs estimate that they have been underpaid by £500m in tax each year by UK landlords.
The tax office has recently stepped up it’s efforts to try to claim back what is owed to them by sending out letters to 40,000 buy-to-let investors, requesting that they make contact to arrange their accounts or run the risk of criminal investigation.
As part of the HMRC’s investigation they have been looking at other ways of finding Landlord who are renting their properties. Mark Giddens, a partner at UHY Hacker Young, said HMRC had gone beyond the Land Registry and the electoral roll. “It was not until April this year that the taxman sent out notices to letting agents in which they asked for details to be provided of everyone on their books,” he said.
“The housing benefit payments that go direct to landlords are also being monitored more closely. This information can be obtained through the local council’s records. By investing all this time and effort they have certainty stepped up the pressure on landlords who are not declaring enough, and the letters are the next part of that.”
So what are your tax liabilities as a landlord?
The income you receive from renting a property is taxable. You will need to declare the rent you receive as part of your Self Assessment tax return – you will then be charged tax on this income, the amount will vary depending on which bracket you fall into; 20% for basic rate taxpayers, 40% for higher rate, and 45% for additional rate.
You can minimise your tax liability by taking off certain allowable expenses, these include:
• Interest on buy-to-let mortgage payments – only the interest is deductable
• Letting agency fees
• Maintenance costs (repairs and upkeep, but not property improvements such as building an extension)
• Buildings and contents insurance premiums
• Council Tax (if you pay it and not the tenant)
• Utility bills (if you pay the utility bills)
If you would like some extra help with finding out your tax liabilities then you will need to get in touch with an accountant, who’s fees are also tax deductable.
If you are a buy to let landlord or a would be landlord why not pop into your local branch of Intercounty for a chat and a coffee or call our team on 0844 8111090.
Source: Landlord Expert