A Simple Guide to TaxV1-JC-17072015
Here at RITA4Rent, the question we are faced with time and time again is: "I have just become a landlord. Where do I start with my taxes?"
As has been proved by HM Revenue and Customs' Let Property Campaign, a scheme targeting those not declaring rental profits, there is quite a serious issue in that a lot of landlords do not understand their taxation obligations. It has previously been reported that 1 in 3 landlords did not declare their rental profits, highlighting the need for greater landlord education and awareness in the self-assessment tax system.
Whether you have purchased an investment property, or inherited a property which is now let to tenants, or even let your previous home to tenants, you must consider your tax implications and determine how and if this should be reported. For most landlords, you will need to submit a self-assessment tax return.
A self-assessment tax return is a form which is submitted to H M Revenue and Customs (HMRC). This can be completed either in traditional paper format or online. The tax return serves the purpose to report all your taxable income (as well as your rental income and expenditure), and to then determine whether you have paid enough tax during the year, or alternatively, if you have paid too much tax.
Please note importantly, that you are taxed on rental profits not rental income. Taxable profits are calculated by deducting allowable expenditure from your rental income received. If your taxable profits are over £2,500, or your rental income before deducting expenses is in excess of £10,000, then most landlords need to report this on their self-assessment tax return. Should the property be jointly owned, then your share of rental income and expenditure would be reported on your own tax return. The joint owner of the property would therefore report their share separately if they are required to do so.
The rest of this Simple Guide to Tax contains information on the tax year, deadlines and penalties for late or incorrect tax returns, other expenses claimed against rental income, record keeping, capital gains tax and tax exemptions. Please sign in to access the whole guide. You can join as a full member or you can join as a free Guest member today!
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