Tax
If you are a new landlord it is your responsibility to notify the HM Revenue and Customs (HMRC) of the new source of income which you are receiving. The tax is computed through an annual tax return sent to HMRC.
Income tax is payable on profits made from the property rent by computing the total of rents receivable, less expenses. A tenant(s) deposit does not count as income. Typical expenses which can be deducted include:
- Repairs and maintenance (not initial expenditure needed to bring the property up to a letting standard, or improvements)
- Gardening, cleaning, ground rents, service charges, contents and building insurance, management agents fees, legal fees for tenancy agreements, advertising, HMO license costs, water rates, council tax, heating, lighting, security, accountancy fees, subscription to a landlord`s association, motor and travelling expenses for visiting the property.
- This list is not exhaustive and can vary in individual circumstances.
- Interest is no longer tax deductible from your rental income but you will receive a 20% tax credit on any interest paid (meaning in essence interest is fully tax-deductible unless you're a higher rate taxpayer).