The Main Tax Considerations for Landlords

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The Main Tax Considerations for Landlords

If you’re a landlord, it’s important that you consider recent changes to the tax you pay.The Government has recently hit landlords by making changes to the tax you currently pay.The Government has also changed what you are able to claim back when completing your tax returns.

The world of tax can be difficult to traverse at the best of times, so we thought it would be useful to pull together a quick guide outlining the updated tax rules for landlords and their property.

What is Tax for Landlords?

In most cases, the accounting process for Landlords can be time-consuming and difficult to understand – particularly if you’re not used to using spreadsheets!If you’re renting out your property and you’re a little unsure of the tax obligations this comes with, then you’re in luck.You will find some of the key facts explained below.

Paying Income Tax

When you choose to let a property you own, it’s vital that you inform HM Revenue and Customs (HMRC) as you will be required to pay Income Tax in some instances.If you don’t pay your Income Tax, this can result in a penalty.

Any profit you make from renting out a property that you own is classed as part of your income.This means that this will be subject to Income Tax.The amount of tax you are required to pay will be subject to how much you earn overall.

If you’re paying the basic rate of tax, then this means you’ll need to pay 20%.If you’re a higher rate taxpayer, this means you’ll pay 40%.Plus, if you’re in the additional rate bracket you will be taxed 45%. For Landlords living in Scotland, the amount of tax you are required to pay can often differ to the rest of the UK.

Calculating Your ‘Allowable Expenses’

When you begin to calculate your expenses, you need to be able to differentiate between revenue and capital expenses.

Your revenue expenses relate to maintenance and day-to-day running of the property.It’s always worth remembering that this type of expense can be offset against your income tax bill.

Your capital expenses relate to expenses that add value to the property, which mainly covers any renovations undertaken.It’s worth noting that this type of expense is not deductible from your income tax bill.However, it’s not all bad news!In some cases, you can offset these costs against Capital Gains tax.

If you’re still feeling a little bewildered when it comes to your tax considerations as a Landlord, then Tax Kings are always on hand to help you stay up-to-date with all your accounting concerns.Regardless of whether your concern are commercial or residential, this dedicated and experienced team will quickly have you financials in order!