A Tax Guide for Landlords

The information provided is for general guidance only and based on understanding of tax law at March 2018. If you are in any doubt about your tax position you should always seek professional advice. We can recommend several trustworthy firms.

For more information:

• Call our accounts team on 01865 302399

Income Tax

Letting income is taxable in the same way that your savings' interest and salary are taxable. The good news is that you can deduct the vast majority of costs associated with letting to reduce your tax liability, which include:

• Agent's fees
• Maintenance costs
• Buildings insurance
• Service charges (for apartments and leasehold property)
• Professional costs such as accountant's fees
• A "renewals" claim for costs associated with replacing furniture or equipment. This is slightly more complex and you should check your claims with an expert.
• Repairs but not improvements. While like-for-like repairs are deductible, any work to improve your property is not. For example, replacing an old kitchen with a new kitchen is normally allowed, but extending your kitchen into the side return is an improvement and not an allowable cost. If you are not sure where you stand, take professional advice.
• The overhead costs of letting the property, e.g. phone, stationery, internet, motoring and home office costs.

You should keep receipts for everything. If you are a joint owner of a home, then your proportion of the rental income is the same as your ownership proportion. You can own property in uneven shares where you own as tenants-in-common. You should take legal advice on how to own in this manner.

We send all managed landlords a full income and expenditure statement at the end of the financial tax year. Many clients ask us to send a copy to their accountant who will then process the letting income liability.

Non-Resident Landlord Tax

10-15% of our clients live overseas and we are very experienced at handling all Non-Resident tax issues. Our Business Intelligence Manager Tracey Wheeler is an expert in this field and her team help hundreds of landlords each year.

A Non-Resident is defined by HMRC as:

• you left the UK to go abroad permanently or your absence and full-time work abroad lasts at least the whole tax year
• your visits to the UK are less than 183 days in a tax year and average less than 91 days a tax year over a maximum of four consecutive years

There are other scenarios where a taxpayer may be non-resident and we would recommend seeking specialist advice.

If you do not register for Non-Resident Landlord tax exemption, we have to take 20% tax from the gross rent (the income minus allowable expenses) and pay you the net amount remaining. We then send the tax to HMRC. We are audited comprehensively and have to be able to prove to HMRC that we have followed the letter of the law in all cases.

So of course it makes sense to fill out the NRL 1 form (NRL 2 for companies and NRL 3 for trustees) and gain exemption from HMRC. This means we can pay all your rent direct without removing tax. It is better for you and better for us. If you have questions just ask your office's client accountant.

We are legally obliged to give each Non-Resident Landlord a statement by 5th July detailing the rent paid and tax deducted for the previous financial tax year to 31 March.