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Whether you are taking those first steps towards becoming a landlord or have an existing portfolio, having a property specialist accountant and adviser on your side will make the process smoother. Fill in the form below and one of our specialists will be in contact!
We’re accountants for landlords servicing landlords in Kent and London. Whether you are taking those first steps towards becoming a landlord or have an existing portfolio, having a property specialist accountant on your side will make the process smoother.
With ever-changing legislation in the Landlord and Property industry, you need expert advice at hand in order to stay one step ahead and concentrate on building your portfolio.
Our team has a wealth of experience in acting for commercial and residential landlords.
Our landlord specialists have a vast range of experience in advising landlords and property developers over the last 20+ years.
If renting out a property in the UK you will need to register with HM Revenue & Customs the need to complete a Self-Assessment tax return each year. If already completing a Tax Return for other reasons, you will need to complete land and property pages each year and add these to the form that is already submitted. All income received and expenses incurred in the period 6th April to the following 5th April will need to be declared and the return will need to be submitted to the authorities by the following 31st January in order to avoid penalties and fines.
If a property is owned jointly, even between spouses, all parties should register their interest with the authorities and will need to declare to HM Revenue & Customs each year their share of any profits/losses made. If owned by spouses, HM Revenue & Customs will treat the property as owned in equal shares between the parties unless you can justify and prove that it should be in a different proportion and you may have to complete additional documentation to support this. Paperwork for letting agents and solicitors may need to be signed by all parties but each self-assessment tax return is personal to the individual and only has to be signed by that one person.
The answer is, as with many tax issues, ‘it depends’! Where a property is owned jointly any profits would normally be split equally between owners, but if you actually own the property in unequal proportions and can demonstrate this, you expect to receive profits in line with your actual proportion and if the legal paperwork is structured in a certain way, it may be possible to amend the profit sharing ratio to something more akin to the actual position. It is important that if HM Revenue & Customs ask for evidence that you are able to demonstrate the actual position in support of the correct split so we always recommend you take advice before going ahead with such a strategy.
If a profit is made overall, you will be liable to UK tax on that profit. This applies whether you are currently resident in the UK or not. The rate of tax due on your profit will depend upon your other income received in the year so profits could be taxed at either the basic rate, the higher rate or the additional rate of tax in force for that year. If a loss is made overall on the property rental, after offset against similar property rentals in the same tax year the balance can be carried forward and will be offset against the first available profits made in future years.
Unless the property was inherited, when you purchased the property you will probably have incurred various costs including solicitors fees, stamp duty land tax, estate agent fees etc, all of which were detailed on your completion statement. These cannot be used to reduce your tax bill by offset against the rental income received on an annual basis, however you can claim them as deductions when the property is eventually sold. You should therefore keep all original purchase details in a safe place so that you have evidence of costs incurred, as any sale may not take place until many years down the line.
Where a sale takes place after 27th October 2021, owners of UK residential property must complete and submit an extra form to HM Revenue & Customs (HMRC), as well as pay any tax, within 60 days of the completion date. Non-UK resident landlords must adhere to these rules for sale of commercial property too.
You will need to retain a note of the original acquisition date, costs and any related solicitor’s fees (the completion statement is usually sufficient), as well as improvements made to the property which were not claimed in annual rental accounts as these will be required for any disposal calculations. If you have ever lived in the property as your main or only residence, this could also reduce the CGT due.
All records related to the rental property income, expenses, mortgages and bank statements should be retained for 6 years from the end of the tax year in which the income is declared.
For example records related to rentals declared in the following tax years ends should be held onto until the following dates:
If you are not residing in the UK, your letting agent may be required to withhold tax deductions at a rate of 20% from any rent collected for you, as part of HM Revenue & Customs Non Resident Landlord Scheme. This tax deduction will be paid across to HM Revenue & Customs on your behalf and you should complete a UK tax return each year so that if the deductions made exceed the total liability due, you can claim a refund of any excess. Alternatively, you can apply to HM Revenue & Customs for payments to be made to you without any deduction at source. They will review your record and, if happy that you will submit accurate forms each year they will instruct your letting agent accordingly. UK Self-Assessment tax returns must continue to be completed each year on time and any liabilities paid on time, otherwise HM Revenue & Customs may withdraw their agreement and instruct the management agent to withhold tax at source once more. Your overseas status could also affect the amount of capital gains tax that is due upon sale although this will depend on your specific circumstances.
You are also likely to have to declare the rentals income and taxes paid to the local authorities in your country of residence and any UK tax paid may be available to offset against any offshore liability due under the double tax treaty with that country (so you should not have to pay tax twice on the same income)
If you no longer have a mortgage against the rental property, you will no longer have any interest charges you can claim as an expense against the income received. This could increase your tax bill despite the restrictions on finance claims since April 2017, but you will no longer have to fun the monthly outgoing so cash flow wise this may still be of benefit to you, depending on your circumstances. You do not have to hold a mortgage against the property and if you wish to pay it off you can do so without notification being made to the authorities. We would always recommend that you speak to your advisor before making such a decision as there may be alternative uses for those funds which are better suited to your circumstances.
It can be, yes. If the tenant remains in occupation, you will still be receiving income each month which can contribute towards any costs incurred and you can start the renovations at the date that suits you. If you prefer to do this when the property is empty, you will need to wait until the contract with the current tenant expires, which could delay your progress. You will also incur costs of re-advertising the property once the renovations are complete and it could remain empty for a number of months, with no income being received but costs continuing to be incurred. The tenant and any letting agent being used should be notified of any potential disruption as far in advance as possible.
It is your choice whether to use an agent or not. If you choose not to use an agent, you will need to be available to respond to tenant queries and any problems that may arise at any time. You will also need to be aware of your responsibilities as a landlord, legal and otherwise as you will not be receiving the advice from an expert. If you live outside of the UK and HM Revenue & Customs require 20% tax to be withheld from payments made to you, they may rely on the tenant to withhold tax and pay it to HM Revenue & Customs on your behalf, which is harder to regulate and not ideal. Agency fees are a tax deductible expense and so depending on your attitude to risk, you may prefer to pay a fee to an expert and limit your exposure to the intricacies of the landlord legal system!
If you are happy to prepare rental accounts and any personal tax returns required each year, you do not have to appoint a UK tax advisor. The benefits of appointing one do however include the following: – Advice on the latest tax rules and regulations as and when they change – Advice on additional expenses or allowances that you may be entitled to and are not already claiming – Advice on ways to reduce your overall tax liabilities where possible – Better cash flow as you will receive advance notice of any tax liabilities due – Freeing up your time to deal with more important issues, as the advisor will generally deal with the annual paperwork issued by the authorities in relation to your tax affairs, will prepare the rental accounts, will prepare the tax return and provide you with the advice relevant to your personal position.
Personal Tax Specialist
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