Letting a property can be a legislative and economic minefield. As a landlord you should always ensure that you are up to date with current legal requirements such as the deposit rules, matters of health and safety and of course, your tax liability.
As a landlord of a rental property, it is essential that you know how much tax you have to pay and also which areas can be written off as non-taxable expenses. Any rental income you receive from letting out your property must be declared, as income tax is payable.
Income tax is payable on rent received from property which is let. Your tax position will determine whether you pay tax or not. All profit you make from letting should be added to your other taxable income for the year, although the financial records for letting must still be kept separate. You have to pay income tax if the total of your taxable income is greater than your tax allowances.
Only those expenses incurred ‘wholly and exclusively’ for the purpose of the let can be offset against your letting income. These might include mortgage interest, general repairs and maintenance, insurance, accountant fees, council tax/utility bills (when the property is vacant), insurance costs, wear and tear ;and of course property management fees.
You need to keep a record of all income and expenditure incurred in relation to all lettings. The records should show to whom payments have been made and from whom income has been received. Acorn Property Management Services will provide you with a regular monthly statement.
You may not need to pay any income tax at all. For example, if the let property is mortgaged, and the mortgage and related costs of up keeping the property exceed the rent you receive, then it is possible that no tax will be payable.
Managing your tax liability is an essential part of renting a property. It is important that you have the correct guidance so that you are aware of all aspects of your liability and equally you are not paying unnecessary taxes!
Lorraine Reeves, Acorn Residential Lettings Manager, Stevenage Branch