When you start renting out property, you must tell HM Revenue and Customs (HMRC) and you may have to pay tax. If you don’t, you could be charged a penalty. You must report income from property rental of more than £2,500 a year on a Self Assessment tax return. If it’s less than £2,500 a year, call the Self Assessment Helpline to report it.


You can legally reduce you your tax bill by claiming for allowable expenses like any other business HM Revenue & Customs say letting out a property means a landlord must pay tax on the profits but only after costs are deducted.

If you choose to use a letting agent to find a tenant or manage your property, you’ll probably pay between 10pc and 15pc of the monthly rental income in fees which is allowable expense.  

If you decide to rent your property privately, you can claim back the cost of advertising for tenants, purchasing a tenancy agreement, credit checking, referencing, deposit protection and professional inventory costs.

You can use all the interest you pay on your mortgage each year to offset your tax bill. If you have an interest-only mortgage, your whole monthly repayments will be tax deductible. If your repayments are roughly equal to your net income, is allowable expense so may not have to pay any income tax on the property at all.

Broker and arrangement fees are tax deductible and can be claimed back in the year you arranged a mortgage. In fact, any incidental costs associated with taking loan finance are an allowable expense.

As a landlord you will need specialist landlord insurance will cover the building, your liability as a landlord and loss of rent. You can also add contents cover, home emergency, legal expenses and rent guarantee insurance. All of these are an allowable expense

Maintenance and repairs in fact any money you spend keeping the property in a good state of repair is an allowable tax deductible expense. While you cannot claim for renovations, extensions or improvements that add value to the property, you can offset expenses to correct wear and tear.

If you provide furniture you can choose to claim back either a general “wear and tear” allowance or the exact cost of replacing individual items.

The wear and tear allowance is 10pc of the rent annually, minus any costs you pay on behalf of the tenant such as council tax. You do not have to have spent any money replacing or repairing the furniture in a given year to claim this allowance.

Alternatively you could claim the exact cost of replacing furniture in the property. This only applies to existing furniture – you cannot claim back the cost of furnishing it in the first place.

If you pay any council tax or utility bills that a tenant would normally pay, you can claim the whole cost. You can also claim these costs during void periods, when there is no tenant living in the property.

If you are a leaseholder, you will usually pay ground rent to the freeholder. Service charges are common in blocks of flats and can vary greatly. Basic charges cover cleaning, maintenance, heating and lighting for common areas, but other costs could include security or concierge staff. You can also claim back any on-site services such as gardening and electrical costs.

Other direct costs of letting the property such as phone calls, stationery and the costs of travelling between different properties for the purposes of the rental business are also claimable expenses.

Remember most capital expenses like buying and selling a property, such as the purchase price and agent and legal fees cannot be used to offset your income tax, many other costs can. If you make a profit when you sell your buy-to-let property, you’ll be liable to pay Capital Gains Tax. Find out more about tax on buy-to-let property profits from the GOV.UK website.

Information is general and believed to be correct and you should always seek professional tax advice. If you looking for a chartered accountant tis site provides by the ICAEW is the definitive list tax services, bookkeeping professionals https://find.icaew.com/

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