UK Property Rental Income Tax: Seven Things to Know When You Let Property

Are you a property owner here in the UK and having property rental income? You might have questions how to manage your property income and expenses for tax purposes and whether any new rules coming that will affect you. In this article, we will mention seven key things as a guidance regarding your UK property rental income tax and might help you.

Seven Things About Property Rental Income Tax: –

1. Register for Self Assessment: You should register with HMRC for your self assessment tax so that you can declare your UK property rental income. You can do the registration online or via post. Doing online registration is quicker and time consuming. Please note that the registration deadline is 05 October (for example, you should register by 05 October 2022 for tax year ending 05 April 2022).
2. Record Keeping: You need to keep your rental income records for 5 years and 10 months after the end of the tax year. We commend to use one dedicated bank account for your property rental income and expenses and keep all invoices accordingly so that we can manage your record smoothly.
3. Use All Available Expenses: A range of expenses are available to deduct from your property rental income that are allowable for tax purposes. Please have a look in HMRC website and speak to your tax advisors how to minimise your tax liability legitimately. Please note that any expenses that are “wholly and exclusively” for rental income purpose can be deductible.
4. Transferring Ownership Between Spouses: If you are newly married and having property in your name only, you may transfer the property between spouses without paying Capital Gains Tax (CGT). However, the transfer might be subject to Stamp Duty Land Tax (SDLT) and you should take careful decision when doing so.
5. Mortgage Interest and Tax Relief: Since April 2020, you are no longer eligible to deduct interest as an expense on your property rental income. Instead, you will receive tax relief at 20%. Therefore, the basic taxpayers can utilise the interest fully. Unfortunately, the higher and additional taxpayers can do so.
6. Ready for Making Tax Digital (MTD): The MTD for ITSA is compulsory for all from 06 April 2024 for those people having annual rental income of more than £10,000. You need to update your rental income and expenses every quarter along with your annual self assessment tax return that you do currently.
7. Submission and Payment to HMRC: 31 January is the deadline for submitting the tax return by online and pay the tax to HMRC as well on the same date. For example, the tax return for year ending 05 April 2022 should be submitted by 31 January 2023. If you submit paper-based tax return, then the submission should be by 31 October. Moreover, some taxpayers may subject to pay their tax liability on account and the deadline is 31 January and 31 July.   

As a landlord, you should comply with the tax matters on your property rental income. You may also consider some other aspects along with the above mentioned. The Stan Lee is here to help confidently on your UK property rental income tax affairs.

The above information is just as a general information that might help you. However, we highly recommend having expert advice suited for your circumstances. The Stan Lee and its author are not liable if you rely on this and have any consequences.