Don’t Pay Too Much Tax!
Your tax position when it comes to income from property and rent will be different depending upon your particular situation. The main rules that you need to consider are explained in this post. You will be taxed differently if you rent rooms in your home or let out your property as a holiday home. If you own properties abroad then different rules will apply as will the letting of your home while you are living overseas.
The profit that you make from renting your property is the difference between your rental income and the permissible expenses and allowances. You will be taxed on these profits. Your income from letting the property is defined as the rents that you collect as well as charges that are made for using furniture, hot water and heating provision, repairs and cleaning of the property.
If you have a number of rental properties then the incomes can be combined as can expense receipts. You can deduct expenses from one property from the receipts of others. You need to bear in mind that properties owned overseas will be treated differently so these can’t be included with UK properties.
Rate Of Tax
The tax payable on your rental profits will be at the same rate as any income that you receive from a business or employment. This could be a 20% tax rate, 40% or 45% dependant on your income tax band. You have to declare the income you make from property rental for the tax year for which it is due. It doesn’t matter if you do not receive the income (or part of it) until after the tax year has concluded. When it comes to expenses you can deduct any permissible expenses which fall into the same tax year whether you have paid the bills for the work done or not.
Please watch this very useful video about tax on rental income where Tax Expert Michael Wright explains the impact of recent government changes on tax for landlords.