Tax tips for landlords

If you rent out property and earn money from tenants, you may have to pay tax, and fill out a tax return for the 2013-2014 financial year. MCC have a few tips to help you fill out your tax return and make the most of your earnings:

  • If you own the property personally, and are earning over £2,500, you must report your earnings on a self assessment tax return. However it is important to be aware of what can be claimed as allowable expenses. Allowable expenses are day-to-day costs that need to be paid to maintain the property – for example, letting agent fees, utility bills, contents insurance, council tax, and advertising. A full list of allowable expenses for residential landlords can be found here.
  • It is also essential to know what cannot be claimed as expenses to avoid problems with HMRC. The cost of a property or the cost of large scale renovations cannot be claimed, as they are considered to be ‘capital expenditure’. However small repairs to wear and tear can be claimed. If you are unsure whether a repair on your property can be claimed, it is always best to contact HMRC and check before filling out your tax return.
  • Don’t forget to exclude tenant deposits when calculating your income. This money is not yours permanently, and should be kept in a safe and separate account in order to return it to the tenants at the end of their residency.
  • Keep a separate bank account purely for rent paid by tenants and be sure to print off bank statements regularly if you use online banking. This will make it easier to give evidence of earnings if necessary and prevent any confusion with any other incoming or outgoing costs.
  • Be careful when calculating Stamp Duty Land Tax (SDLT). This is the calculation which most landlords slip up on as it is more complicated than it first appears. There are, however, plenty of SDLT calculators and tools provided by HMRC online so be sure to use them. Alternatively, ask your accountant for assistance to be sure you don’t make any mistakes.

Being a landlord can be a lucrative profession, or even a great way of bringing in an extra income on top of your full time job, however it is important to be aware of the tax rules that apply, as well the ways you can cut down your tax bill. Ultimately, the best way to ensure your tax return is both accurate and cost-efficient is to hire a chartered accountant like MCC. We can ensure that you are working in the most tax efficient manner, and assist you in everything from tax returns to payroll to financial planning. Contact our team of Greater Manchester accountants on 0161 707 1500 or send us a message through our website.



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