It is possible that you are the owner of a property you invested in, and you have tenants living in that property, from whom you collect rent? Now if that is the case, you must declare the rental income you receive from this when you file your taxes.
Remember that the amount of tax you pay on your rental income depends mainly on the amount of profit you make and your employment status. Let us discuss a little more in detail.
In the United Kingdom, there are three main types of taxes:
If you are a full-time employee of some organisation and rent out one or two properties, you will possibly pay rental income tax on the profit you make from the rent on those properties.
Your tenant is responsible for paying council tax, but if you have no tenant, you must pay it.
If you are a full-time landlord, you must declare to Her Majesty’s Revenue and Customs (HMRC) that you are starting a business and the taxation rules are then different in that case.
There are costs that you can claim to reduce tax, and the rules are different for the following types of properties:
You or your organisation is supposed to pay tax on the profit gained from renting out the property, after making deductions for certain permissible expenses. These expenses are items you must spend money on in the daily running of the property, like:
It may be possible for you to claim wear and tear allowance for a tax year.
In this category, you can claim:
Remember that you can claim these only if:
You may claim machinery and plant capital allowances on certain items if you have a commercial property on the rental market, like a garage, shop or lock-up.
As a good citizen of the United Kingdom, paying income tax is part of your duties, but you can always figure out ways to save some money on these taxes so that you do not end up paying exorbitant amounts.
Thank you for reading Repossessed Houses blog post. If you would like to find out more about property investment and the rental tax then send an email to [email protected] and we will answer any questions or queries you may have.
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