Self Assessment Tax Return for Landlords

As a landlord, navigating the complexities of tax returns can be daunting. Understanding the elements involved in filing a Self Assessment Tax Return is crucial, especially if you have income from renting out residential properties. This guide will help you understand the key aspects, including allowable expenses, capital expenditure, and how to potentially reduce your rental income tax bill. We’ll also discuss how an accounting firm can assist you.

Residential Property Rental Income

When you rent out property, the income you receive is taxable. All rental income must be declared on your Self Assessment Tax Return. This includes payments for the rental periods, as well as any other income from the property, such as fees for services like cleaning or gardening.

Mortgage Interest Tax Relief

In recent years, there have been changes to how landlords can claim mortgage interest relief. As of April 2020, you can no longer deduct mortgage expenses from your rental income to reduce your tax bill. Instead, you receive a tax credit, based on 20% of your mortgage interest payments. This change can significantly impact your overall tax calculation, so it’s important to understand how it applies to your situation.

Allowable Expenses Against Rental Income

Certain expenses can be deducted from your rental income to reduce your taxable profit. These allowable expenses include:

• Property repairs and maintenance: Costs for fixing wear and tear or damage to the property.
• Utility bills: If you pay for gas, electricity, water, etc.
• Council tax and insurance: Any payments you make for these services.
• Letting agent fees: Charges from property management companies.
• Professional fees: Legal or accounting services related to the property.

Non-Allowable Expenses

Not all expenses can be deducted from your rental income. Understanding what isn’t allowable is just as important. Non-allowable expenses typically include:

• Capital expenditure: Costs for purchasing or improving a property. These are considered investments rather than maintenance.
• Personal expenses: Any costs not directly related to the rental property.

Capital Expenditure

Capital expenditure refers to the expenses incurred to improve or add value to the property, such as extensions or conversions. While these costs cannot be deducted from your rental income as expenses, they may be considered when calculating Capital Gains Tax if you sell the property.

How to Reduce Tax Return for Landlords Tax Bill

1. Claim all allowable expenses: Ensure you claim all eligible expenses to reduce your taxable income.
2. Use the Rent-a-Room Scheme: If applicable, this allows you to earn up to £7,500 tax-free from letting a furnished room in your home.
3. Consider joint ownership: Splitting income between owners can sometimes reduce the overall tax bill.
4. Keep accurate records: Meticulous record-keeping ensures you don’t miss any deductible expenses.

How an Accounting Firm Can Help

An accounting firm can be invaluable in managing your tax affairs. They offer services such as:

• Tax planning and advice: Helping you structure your finances efficiently.
• Filing tax returns: Ensuring compliance with HMRC regulations.
• Maximizing deductions: Identifying all possible deductions to reduce your tax bill.
• Handling audits: Providing support and representation in case of a tax audit.

By working with professionals, you can ensure your tax return is accurate and optimize your financial situation as a landlord. At Tx Accountants Ltd, we act as your partners in navigating the tax maze. Our goal is simple: to help you minimize your tax liability while staying compliant with HMRC regulations..

Let’s take the stress out of your taxes together! Reach out to us at info@txaccountants.co.uk for a friendly chat about how we can help you save money and make the most of your hard-earned income. Plus, don’t forget to ask about our free consultation!