Landlord Tax & Self-Assessment – Tips for Landlords

As we enter into the new year of 2022 we need to remind landlords that the self-assessment deadline is 31^st January 2022 for online submissions.

If a landlord has earnt between £2500 and £9999 in rent after allowable expenses or if a landlord has earnt over £10,000 before allowable expenses then they need to declare it.

Most landlords will only be liable for income tax on their rental income, however if they are a portfolio landlord earning more than £6,475 per year and they run rental properties as a business or as their main job the landlord will also be liable for National Insurance Contributions.

Landlords who have chosen to run their rental portfolios as a Limited company will need to declare their income via corporation tax, however most landlords in this position have their own tax accountant as the process is a little more complicated.

Tax doesn’t have to be taxing (sorry) but landlords need to know the process so they can ensure that they aren’t paying too much tax. Our top tips:

Be Prepared

A landlord needs to make sure that they are registered with HMRC, a landlord needs to register by the 5^th of October of the tax year. When a landlord registers with HMRC they will get a Government Gateway ID so they can login to their government account to submit the self-assessment.

Stay on top of deadlines

Landlords must know their deadlines for submissions and also for paying tax. There are big fines for missing tax deadlines –

Be Organised

It is important to keep track of all of the income and expenses for the tax year for a rental property to ensure that the accounts are accurate. HMRC give a handy list of the information they expect landlords to have and be able to supply when submitting a self-assessment.

• The dates the property was let out
• All of the money that has been spent on the property (including cash, cheque, credit and debit card transactions)
• All rents received

Our Fully Managed Landlords can get this information by signing into their Payprop Accounts app or by requesting the information from one of our team making this process super simple and easy. 

Other recommended supporting documents that HMRC state that landlords should keep.

• lease or letting contracts
• rent books
• receipts
• invoices
• bank statements
• mileage logs (for journeys that are solely for your property business purposes)
• cost of the vehicle used for property business and its CO2 emissions
• for furnished holiday lettings and commercial premises, the costs of any other capital items used in the property
• all documents relating to when you bought the property

Know what classed as allowable expenses

It is important for landlords to know what HMRC will allow them to use as allowable expenses as this will offset against the tax you will need to pay.

We do recommend that landlords with any size portfolio get professional advice from a landlord accountant who can ensure that they offset all allowable costs and ensure that a landlord is paying the correct amount of tax.

The rules on what is allowable has changed in recent years, the main allowable expenses include –

• property repair and maintenance costs (but not improvements)
• replacement of domestic items (from April 2016)
• accounting and letting agents’ fees
• landlord insurance
• running costs

Know the tax changes for 2022

The biggest change for 2022 that effects the Self-Assessment is the removal of claiming tax relief on your mortgage interest repayments. This has been slowly phased out over the last few years and 2022 is the first self-assessment where this is now abolished. Instead it is replaced with landlords only being able to offset 20% of their mortgage interest payments against their tax.

Capital Gains Tax was changed for 2020/2021. The government increased the capital gains tax allowance and it has gone from £12,000 to £12,300. This is important for any landlords that sold their rental property in the financial year.

If a landlord sells a second property the landlord gets to earn more tax-free. But the capital gains tax rate is higher for landlords – 18 per cent for basic-rate taxpayers, and 28 per cent for higher and additional-rate taxpayers. Another change is the abolishment of Private Residence Relief. Previously, if a landlord lived in the rental property before letting it to tenants, a landlord would get Private Residence Relief when a landlord sold. This meant that a landlord wouldn’t pay any capital gains tax for the time they lived in the property, plus an extra 18 months after they moved out. But under the new rules this has been reduced to nine months. The £40,000 of lettings relief which a landlord could claim if they rented out a property that’s been the landlord’s main home will only apply to landlords who share occupancy with their tenants.

Have all information ready for when you start the form

The online form is pretty simple and straight forward but you won’t be able to fill it out without being prepared with all of the above mentioned information. Landlords need to fill in the UK Property Section, as this related to rental income from inside the UK.

Pay your Tax

If you apply online you will be notified when your tax calculation has been made and you can see this on your online profile. If you send your self-assessment by post then you will be contacted by HMRC via letter.

You must pay your bill as soon as possible, you can pay by the following methods

• online or telephone banking
• Chaps (Clearing House Automated Payment System)
• debit card online (you cannot pay by personal credit card)
• at your bank or building society

If you are genuinely struggling to pay your tax bill and it is less than £30,000 you are able to use HMRCs Time to Pay Service to set up a payment plan. This allows you to pay over 12 months, however you will be charged interest and therefore your tax bill will be higher.

If you are already a client and need your End of Year Summary, just drop us an email to accounts@llcoproperty.com

Whether you are a landlord with a single property or a landlord with a large portfolio get in touch with our knowledgeable team to see how we can save you time with our range of services.

We are the local property experts in Cornwall. If you need any type of property advice, contact us on 01326 331812 or email hello@llcoproperty.com, and we’ll be delighted to help.

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