As a landlord, you might not think of yourself as self-employed or a small business owner. HMRC, on the other hand, does, and if you’re making money from renting out a property, you’ll need to fill in a Self Assessment tax return.
The Self Assessment process might seem daunting at first, especially given how many changes to tax are announced every year. That’s why we created 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:
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.
Once you’re registered you can then 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.
If you’ve created a limited company for the purposes of letting out your properties, the process is slightly different and you’ll need to register for Corporation Tax.
You’ll then follow the process for paying Corporation Tax. Read more about this in our guide to filing a company tax return.
Tax return deadlines
The deadline for submitting your tax return for each financial year is usually 31 October for paper tax returns and 31 January for online tax returns. So for the 2019-20 tax year, the deadline for paper tax returns in 31 October 2020 and the deadline for online tax returns is 31 January 2021.
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 2019/20 tax is 31 January 2021.
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.
It’s important to keep a record of all your income and expenses so that you can easily find it when you come to fill in your return.
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 and maintenance costs
- Replacement of domestic items (from April 2016)
- 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
Read more on expenses:
- Self-employed tax deductible expenses: what can I claim?
- What expenses can I claim as a limited company?
Tax changes for landlords
The government often announce tax changes for landlords. 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.
You can read about how these three new landlord regulations may affect you in 2019 and 4 new buy-to-let tax rules landlords should know about for 2019, but it’s worth keeping your eye on our landlord news, in case more are introduced.