In the middle of the holiday season, preparing for self-assessment is probably the last thing on your mind.
But as a landlord, the tax rules you’ll need to consider are often complicated and frequently subject to change. It’s a lot to get to grips with, and not something you want to be rushing to do in 6 months’ time.
By keeping records throughout the year and getting your return ready as early as possible, you can avoid last-minute stress.
Do I need to complete self-assessment?
You might not think of yourself as self-employed – especially if you’re receiving rent in addition to your existing income – but self-assessment isn’t just for entrepreneurs and freelancers.
There are a number of reasons you may need to complete a self-assessment tax return, including if you received more than £2,500 from renting property in the last tax year.
Contact HMRC’s income tax helpline if you had rental income between £1,000 and £2,500.
How does self-assessment work for landlords?
Anyone who needs to complete a self-assessment return will need to register with HMRC by 5 October after first tax year in which they had taxable profits.
You’ll then be able to fill out your tax return, using information on your income and expenses for the year.
The details you provide will need to be accurate, and HMRC may ask to see records from the past 5-7 years, so it’s vital to store information safely throughout the year.
Accounting software can be a useful tool for this. We can offer guidance on choosing and setting up a system that suits you – see our cloud accounting service for more information.
Expenses
Managing a rented property comes with various costs, but which ones count as expenses for tax purposes?
Landlords can claim expenses for a number of costs, including:
- general maintenance and repairs
- water, gas, electricity and council tax
- fees for letting agents and accountants
- services, such as gardeners and cleaners
- insurance, including buildings, contents and public liability
- rents (if you’re sub-letting), ground rents and service charges
- legal fees for lets of a year or less, or for renewing a lease for less than 50 years.
Deadlines
Almost 750,000 people missed the filing deadline for self-assessment in 2018, according to HMRC statistics.
Filing your return late could result in penalties, so it’s important to know your deadlines for this tax year.
The deadline for filing your 2017/18 self-assessment is 31 October 2018 for paper returns, or 31 January 2019 for online returns. 31 January is also the deadline for paying any tax that’s due.
You could be fined £100 if your return is up to 3 months late, and more if it’s later, or if you don’t pay your bill.
Tax changes for landlords
The last few years have seen a series of changes introduced for buy-to-let landlords making it more important than ever to keep up to date with current regulation.
Here are a few of the main changes that could affect you this tax year and in the future.
Mortgage interest relief
Mortgage interest relief is currently being phased out so you’ll only be able to claim relief on 75% of your mortgage interest for the 2017/18 tax year.
Capital gains tax
You may be affected by capital gains tax (CGT), which is charged at 18% for basic rate taxpayers, and 28% for additional rate taxpayers when selling a second property.
The threshold for CGT increased to £11,700 for the 2018/19 tax year.
Stamp duty
An extra 3% stamp duty was introduced for buy-to-let landlords and second home owners in April 2016, which could make it more expensive for you to increase your property portfolio.
Get in touch
We can make sure your self-assessment return is completed accurately and filed on time, as well as keeping you up to date on the latest tax changes affecting landlords.
Find out more about our accounting service for landlords, or speak to us about how we can help.