As a landlord, you might not think of yourself as self-employed or a small business owner. HMRC, however, does, and if you’re making money from renting out your properties you’ll need to fill in a Self Assessment tax return.
The Self Assessment process can seem rather daunting at first, especially given how many changes to tax are announced every year. We’ve put together this guide to help you understand the different parts of Self Assessment and work out what you need to do.
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What tax do landlords need to pay?
As a landlord, there are a number of different types of tax you’ll have to keep in mind. Legislation is constantly shifting, but some of the main ones to consider are:
- Income tax
- National Insurance contributions
- Stamp Duty Land Tax
- Capital gains tax
Stamp Duty Land Tax and capital gains tax only need to be paid when buying or selling a property - you can read more about them in our guide to rental property tax.
Income tax and NICs are currently paid annually and are based on the income you make from renting out your properties. To pay your income tax and NICs you need to register for Self Assessment and complete a tax return each year. Wondering how much you’ll owe? Read our guide to how much tax landlords pay.
How does the Self Assessment process work for landlords?
The Self Assessment process is largely the same whether you’re a landlord, small business owner, or sole trader.
Registering for Self Assessment
The first thing you need to do is register for Self Assessment. If you’ve created a company through which you let out your properties the process is slightly different and you will need to register here.
Once you’re registered you’re then able to file your tax return. You do this by filling out the Self Assessment tax return form either online or on paper - though the government is looking to do away with paper tax returns at some point in the future, so keep that in mind.
Tax return deadlines
The deadline for submitting your tax return for each financial year is usually October for paper tax returns and January for online tax returns. So for the 2016/17 tax year, which ended this April, the deadline for paper tax returns in October 31 2017 and the deadline for online tax returns is January 31 2018.
Once you’ve filed your tax return you then need to pay the tax you owe. The deadline is usually the same as the final date for online Self Assessment tax returns, so the deadline for paying your 20016/17 tax is January 31 2018.
Filling in your Self Assessment tax return
To fill in your tax return you’ll need information about all the income you’ve received throughout the tax year, as well as information about expenses you want to deduct from your tax return.
It’s important to keep a record of all your income and expenses so that you can easily find it when it comes time to fill in your tax return. For a better idea of record keeping, check out our article on how to keep buy-to-let records for tax returns.
You’ll also need your UTR (unique taxpayer reference) number, which is assigned to you when you register for Self Assessment. It’s usually printed on communications from HMRC regarding your tax return, but keep a note of it somewhere safe so you can easily find it when the time comes.
What are allowable expenses for landlords?
Though there have been some changes in recent years, there are still a number of expenses landlords are allowed to deduct from the cost of their tax bill. Some of the main ones are:
- Property repair costs
- Like-for-like renewals
- Wear and tear allowance
- Landlord energy savings allowance
- Mortgage arrangement fees
- Accounting fees
- Running costs
Depending on what costs your tenants take on board, you can also claim for:
- Letting agent fees
- Light and heating costs
- Service charges
- Ground rent
- Cleaning costs
- Advertising costs
The rules for how you deduct these expenses from your tax varies, so read about the most common types of rental income tax deductible expenses for more info.
Tax changes for landlords
The government often announce tax changes for landlords, though the most recent Autumn Statement was remarkably quiet. While we’ve tried to provide an exhaustive list of everything you need to keep in mind for your tax return, exactly what you need to pay will depend on your particular circumstances and how things change in future.