Do you own property or land that is rented out, or are you intending to “buy to let”? You’ll need to complete a Self Assessment if you receive any of the following:
- Rental income and other receipts from UK land and/or property
- Income from letting furnished holiday accommodation in the UK or European Economic Area (EEA), you may also have to complete the equivalent return in the country where the property is; the rules here are a bit more complicated so watch out
- Premiums arising from leases of UK land
- An inducement to take an interest in any property for letting
Accounts should be completed to the 5 April. On the basis that it’s not a huge income generator, complete the income statement on a receipts and payments basis, known as cash accounting.
If a property is let jointly, the income can be split between each of the partners, everyone needs to complete a Self Assessment. If the partners are married or in a civil relationship, it is assumed the split is 50/50. If this is not the case complete a “Declaration of beneficial interest in joint property and income".
What can be claimed?
If you rent a room in your home you are able to claim “Rent a Room” relief up to £4,250 without having to retain any receipts.
If the total income from this sort of letting is more than £4,250 you can choose between:
- paying tax just on the excess over £4,250 (or £2,125 if let jointly) without taking off any expenses
- calculating your profit from letting in the usual way. You may want to do this if, for instance, you have made a loss. In which case these are the expenses that are allowable.
Types of allowable expenses
- Any rents you pay under a lease of a property
- Council Tax
- Water charges, not paid by tenants
- Ground rents
- Insurance for both the property and its contents
- Costs of services you provide such as gardening, porterage, cleaning, communal hot water, etc.
- Insurance against loss of rents is also an allowable cost, if you claim under your insurance policy any money you receive should be included as income
2.Loan interest and other financial costs
- The costs of obtaining a loan or an alternative finance arrangement to buy a property that you let
- Any interest on such a loan or alternative finance payments.
3.Expenses that prevent the property from deteriorating
4.If you are not claiming capital allowances see below, you can claim the costs of replacing furniture, furnishings and machinery supplied with your property.
5.Legal, management and other professional fees: management fees paid to an agent to cover rent collection, advertising and similar administrative expenses can be deducted.
6.Other allowable property expenses such as stationery, phone, business travelling and other miscellaneous costs.
7.Capital allowances: You can claim tax allowances, called capital allowances, for the cost of purchasing and improvements see my separate blog on this
8.10% writing down allowance on furnished lets
9.You may also be entitled to a 100% first year allowance if you have bought certain energy-saving technologies used in the property rental business. They are available for the purchase of designated energy-saving and water-efficient technologies
10.You may also be able to claim 100% allowances for converting empty or underused space above shops and other commercial premises to flats for renting.
A couple of final points:
Private use adjustment – if expenses include any amounts for non-business purposes
Personal expenses are not allowable as a deduction
For furnished holiday lets and EEA lets, the rules are more complicated.