The amount of rent that is tax deductible can differ depending upon your lifestyle. If you provide fully furnished accommodation then your tax deductions are significantly higher than if you only provide beds and breakfast or self catering. This may mean that it is worthwhile obtaining a rental valuation from a local surveyor who will report on what kind of tenant would be likely to move in as well as their likely financial circumstances.
Here are some tax tips for landlords in the UK:
1. You are allowed to deduct expenses from your rental income and capital gains.
2. Capital gains are taxed at 20% on the profit, minus allowable expenses (not applicable if you sell off a rental property).
3. A £25,000 annual exemption applies to property owned by sole traders.
4. If you receive corporation tax of 20%, this is deducted from your income so that personal savings are not taxed twice - meaning it could be worth saving an extra £3,000 or more every year!
5. If a tenant pays their rent with cash each month and don't have a cheque book, please get them one.
6. If you rent out a room, you are entitled to a £5 per room per week 'combined heating fuel' rebate.
7. If you pay direct debit instalments, the interest is often tax-exempt.
8. If the tenant pays rent by cheque or direct debit, it is considered as a loan that you get repaid at the end of the tenancy.
9. However if they pay rent by standing order, there is no loan repayment and therefore no capital gains tax liability on your part when you sell up before the end of the tenancy at which point they will be in your debt already!
Conclusion:
Tax is not easy to understand, however if you get the hang of it, it can be a lot of fun!
Here are some tax tips for landlords in the UK:
1. You are allowed to deduct expenses from your rental income and capital gains.
2. Capital gains are taxed at 20% on the profit, minus allowable expenses (not applicable if you sell off a rental property).
3. A £25,000 annual exemption applies to property owned by sole traders.
4. If you receive corporation tax of 20%, this is deducted from your income so that personal savings are not taxed twice - meaning it could be worth saving an extra £3,000 or more every year!
5. If a tenant pays their rent with cash each month and don't have a cheque book, please get them one.
6. If you rent out a room, you are entitled to a £5 per room per week 'combined heating fuel' rebate.
7. If you pay direct debit instalments, the interest is often tax-exempt.
8. If the tenant pays rent by cheque or direct debit, it is considered as a loan that you get repaid at the end of the tenancy.
9. However if they pay rent by standing order, there is no loan repayment and therefore no capital gains tax liability on your part when you sell up before the end of the tenancy at which point they will be in your debt already!
Conclusion:
Tax is not easy to understand, however if you get the hang of it, it can be a lot of fun!
