January 27, 2017

Landlords Tax

Considering renting out a property? Want more tax advice? Your Glasgow accountant from The Kelvin Partnership can give you all the information you need. To make the landlords tax process as comfortable as possible, here is all you need to know. When it comes to landlords tax there are many things you need to consider. Renting out a property can be difficult and being unsure about your tax responsibilities can make it even more stressful!

Income Tax

When you start renting a property out, you must inform HMRC and register as a landlord with your local council. We will make you aware of all the legal requirements because as a landlord there is a lot you are expected to know about. For example, it is illegal to rent out your property without being registered. Without the help from an accountant from The Kelvin Partnership, you might be unaware of vital information. Paying income tax comes hand in hand with renting out your property.

landlords tax

What Are Allowable Expenses?

Our accountants can make it clear what is income tax deductible and what is not. Allowable expenses have to be deducted before calculating your profits. As a landlord you are responsible for revenue and capital expenses of the property. Capital expenses are things like renovations that can contribute to the increase in value of the property. Capital expenses cannot be deducted from your tax bill.

However, revenue expenses are pay outs relating to the maintaining and running of your property and these are deductible from your landlords tax bill. For example, lettings agents’ fees, buildings and contents insurance or any other service like a cleaner or gardener, are all deemed as essential deductible expenses.

You may also be able to claim tax relief on costs for domestic items. Called the ‘replacement of domestic items relief.’ You can claim relief for beds, carpets, fridges etc. We will make sure that you are paying the least amount of landlords tax possible.

landlords tax

We’ll Keep Your Records Safe

It is very worthwhile to keep records of how much rent you receive and your expenses for you to work out the profit you have to pay tax on. These records must include rent books, receipt invoices etc.

Depending on your personal prefrences, we will recommend how best to prepare your accounts. Be aware that your records should be accurate, complete and readable. The HMRC could place a penalty if they deem your rental records insufficient. Don’t stress! With our help this definitely will not happen. It is up to you how you maintain these records. Using a memory card or a disk is a good method, as long as the information is given to HMRC in an appropriate format. Working together, you will have the best success as a landlord.

landlords tax

Updates About Tax Changes

The accountants at The Kelvin Partnership will keep you in the know about all relevant tax changes. The Government is restricting the amount of income tax relief landlords can get, to the basic rate of tax. Starting from April 2017, the changes will be gradually phased in. Affecting landlords renting out residential properties as individuals and also, will affect how you receive relief for interest and other financial costs.

The restriction will be fully in place in April 2020. The percentage of finance costs deductible from rental income will decrease from 75% to 0%.

As a result of the restriction, the way taxable income is calculated will change.

landlords tax

If you would like anymore information about how our Glasgow accountants from The Kelvin Partnership can help you with your landlords tax, contact us.