Private Clients – Landlord Taxation
If you receive rental income from a property you own, it’s important that your tax and accounting affairs are in order.
Like most other forms of income, individuals are required to tell HMRC about rental receipts made on second properties as part of the annual self assessment tax return.
Even if you believe you are making a loss from rental activities, you may still be required to report to HMRC.
With a sharp increase in rentals via websites such as Airbnb, many individuals have become ‘accidental landlords’ and are unaware that their rental activities are subject to UK tax. We can advise you on this and ensure you are meeting your tax obligations in full.
Notifying HMRC about your rental income
If you believe you need to tell HMRC about your rental income, you should notify them and then make full disclosures via your tax return. There are penalties for failing to disclosure correctly.
Rent a Room Scheme
Since April 2016, up to £7,500 of rental income can be earned tax-free under the government’s ‘Rent a Room’ scheme. This is available to occupiers or tenants renting out a furnished room in their home, or running a guest house business from their home.
So, What Do I Declare?
This depends on how much you earn in gross receipts, your total expenses and if you qualify for Rent a Room. If you don’t qualify for Rent a Room, you will pay tax on your rental profits (income less qualifying expenses).
Landlords who do meet the criteria for Rent a Room can either report under the scheme by claiming £7,500 against rental income, or choose to pay tax on net rental profits.
We can assess the optimal tax position for you and advise accordingly.
Landlord Disclosure Facility
The ‘Let Property Campaign’ by HMRC allows all landlords with undisclosed rental income to come forward and declare it. There is no disclosure window but individuals are encouraged to come forward and voluntarily disclose all rental income or face potentially harsher penalties if HMRC discovers such income as part of an enquiry. The Let Property Campaign relates to:
- Holiday lettings
- Student & workforce rentals
- Single rentals
- Multiple properties