If you own a rental property or a buy-to-let, there are several tax obligations you need to be aware of:
Declare rental income: You must declare any rental income you receive to HM Revenue and Customs (HMRC) by completing a Self Assessment tax return each year. You will need to pay income tax on the profit you make from renting out your property after deducting allowable expenses.
Claim allowable expenses: You can deduct certain expenses from your rental income to reduce your tax bill. Allowable expenses can include things like letting agent fees, maintenance and repairs, insurance, and mortgage interest. You can find a full list of allowable expenses on the HMRC website.
Pay tax on capital gains: If you sell your rental property or buy-to-let, you may need to pay capital gains tax on any profit you make. You can reduce your capital gains tax bill by deducting certain expenses, such as the cost of buying and selling the property, from your capital gain.
Consider incorporation: If you are a higher-rate taxpayer, you may be able to reduce your tax bill by transferring your rental property into a limited company. However, there are costs and administrative requirements associated with incorporation, so you should seek professional advice before making any decisions.
It’s important to keep accurate records of your rental income and expenses to ensure you are paying the correct amount of tax. If you are unsure about your tax obligations or need help with your tax affairs, you should speak to us to see how we can help.
