If you own property which you are renting and you are earning a significant amount of income in the form of rent then you should be reporting it to the HMRC in the self assessment tax return.
The significant amount of rent would mean that you are earning above £1000. If you are earning anything less than this amount you don't have to report it to HMRC.
If you are earning between £1000 and £ 2500 you need to contact HMRC.
If you are earning between £2500 and £9, 999 after the allowable expenses you need to register yourself with HMRC and complete the annual self assessment tax return.
If you are earning above £10, 000 before the allowable expenses you should register yourself with HMRC and complete the self assessment tax return.
When you register with the HMRC online to file a return you will get a UTR number and also an activation code in your post. You need to keep that safe . In case you have lost your activation code you can apply for another one by signing in to the online service and requesting a new one.
The taxes that you pay if you own property are
In your self assessment tax return you have to fill in the pages which relate to your property income.
You declare any income, claim allowable expenses and then calculate the profit or loss. If you are making a profit you will be paying tax on it.
You pay income tax depending on how much your total income is. If you are employed somewhere and you have already used your personal allowance this will affect the income tax that you pay to HMRC.
You will calculate the income for your tax year which runs from 6 April to 5 April and deduct the allowable expenses.
The allowable expenses are the deductie costs which you incurred wholly and exclusively for the purpose of renting the property. These costs will reduce your profits and therefore the taxes in the profit.
HMRC lists these costs as follows:
- Water rates, gas and electricity
- Council tax
- Letting agents fees
- Accountants fees
- Landlord insurance
- Advertising costs
- Cost of stationery
- Telephone bills which relate to the business
- Use if home
Or you can claim property income allowance of £1000. It is worth claiming this allowance if your expenses are £1000. If you claim your property allowance you cannot claim any of the above expenses.
There are different reliefs available to the landlords depending on the type of property they are renting.
You might be renting
- Furnished holiday lettings
- Renting a room in your house
- Renting out foreign property
- Letting out a property while you live abroad.
The deadline for submitting paper tax returns for the tax year 2020/ 2021 is 31 Oct 2021 and for online submissions it's 31 Jan 2022.
It will be worth hiring an accountant to fill in the self assessment for you. If you are looking for accountants in Croydon, accountants in Surrey don't hesitate to call us. Our accountants will be happy to advise you, complete your tax returns and do the submissions for you so you don't incur any penalties.