For Landlords

How do I register with HMRC for Self Assessment?

According to HMRC, you should register for Self Assessment within three months of the need arising, ie from the date your circumstances required you to file a Tax Return. As a landlord this would be the date you started to receive rental income, unless you were already in Self Assessment or met the requirement because of other income or circumstances.  In order to register for Self Assessment, you would need to complete the online SA1 form, and you can use the link below.

https://www.tax.service.gov.uk/shortforms/form/SA1 

Once you are registered you should then receive notification by post from HMRC of your 10 digit Unique Taxpayers Reference number, known as your UTR.

How do I account for my rental income?

Most rental accounts are usually prepared on a cash basis, ie when rent is received and when expenses are paid, unless the annual rental exceeds £150,000 or you elect for it not to apply.  You should keep a record of the gross rental income paid each month and a breakdown of the rental expenses, categorising each type of expenses separately.  A simple spreadsheet should suffice.

What expenses are allowable?

You can claim most expenses relating to the rental business, such typical costs are;

-          Agent and management fees

-          New tenancy costs, like inventory or Tenancy Deposit Scheme costs

-          Repairs and maintenance costs (provided they are not to improve the original fixture)

-          Cost of replacement of furnishing and domestic appliances - these must be on a like-for-like basis

-          Mortgage interest paid up (restricted to the value of the property when it was first let), subject to the new finance costs restrictions

-          Legal and professional fees associated with arranging or termination a tenancy

-          Advertising costs for seeking a tenant

-          Service charges and ground rent

-          Utilities and rates paid whilst available for letting

-          Landlord, contents and building insurance

What are the restricted loan interest rules?

Under new rules that came into effect from April 2017, there is a restriction to the way tax relief is claimed on finance costs for residential landlords, which includes mortgage interest and loan arrangement fees. Relief was gradually restricted to the basic rate of tax (20%) over four years, with 100% of the finance costs now claimed as a reduction in tax liability instead of a reduction to taxable rental income. However, the basic rate income tax deduction is restricted to the lower of:

1.       Finance costs- costs not deducted from rental income in the tax year plus any finance costs brought forward.

2.       Property business profits- the profits of the property business in the tax year (after utilising any brought forward losses).

3.       Adjusted total income- the income (after losses and reliefs, and excluding savings and dividends income that exceeds your personal allowance.

In order for us to prepare your rental accounts, we will need a copy of your mortgage interest statement, or the appropriate certificate issued by your lender.

https://www.gov.uk/government/news/changes-to-tax-relief-for-residential-landlords