Landlord Tax

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Landlord Tax

Landlord Tax is rarely an easy issue to understand, but after much research and questioning we have come up with the following:

Do I have to pay tax on any income from letting my property?

This very much depends on your personal circumstances. All income collected from renting your property should be added to any other taxable income you have. However, please ensure that you keep a separate record of your ins and outs. Should your taxable income exceed your tax allowance, then you will have to pay tax. However, there are tax allowances and incentives, especially if you rent a room in the property you live.

Expenses
Only those expenses incurred "wholly and exclusively" for the purposes of letting your property can be offset against your letting income. Keep receipts for everything. All records should be kept for a minimum period of 5 years.
Allowable expenses.

Wear And Tear:
For furnished property you are allowed 10% less of any rates that you pay, i.e. water and council tax. The alternative is to claim for the full replacement value, but I find that 10% tends to be more beneficial.

Insurance:
All insurances connected with your property may be included.

Maintenance and Repairs:
Note that costs for general improvement of your property can not be included. Repairs and general maintenance specifically for the property may be.

Water and Rates:
Where these are not paid by the tenant, you can include these, including Council tax. Make sure you keep the bills.

Agents Fees:
These can be deducted as can any management fees you pay.

Loans etc:

Where your property is being let for a minimum of 26 weeks you can normally claim any interest on loans taken out for the purpose of renting your property. Check with your income tax office.

Every landlord has a duty to declare all income received from a property so that it can be assessed for tax reasons. If you live abroad then you will need to complete a FICO form (Financial Intermediaries and Claims Office). This can be got through your agent who will then be responsible for completing it and sending it to the relevant authority. This form upon agreement from the Inland Revenue allows all the rent to be paid to you. Should you not have this form then the agent or your tenant has to withhold tax at the basic rate and ensure it is paid to the Inland Revenue on your behalf. FICO forms can be obtained directly from the Inland Revenue by ringing your nearest office.

Your agent is unlikely to be an expert on tax so it is worth seeking advice from a qualified accountant who can point you in the right direction and save you from getting fined. It is too easy to say that the Inland Revenue will never find out – I would not like to be on the receiving end should they some how come across the fact that you have been residing abroad and not declaring your income that has been generated in this country.