Self assessment tax return tips for landlords

Many UK landlords, possibly you included, do their own annual self assessment tax returns, even though it's a task that most dislike. It's boring and it takes up precious time that most would rather spend doing just about anything else.

But you can save a few quid if you do it yourself and if you're armed with some basic knowledge, you can get it done in less time. As with other things, sound preparation really pays off. So, what do you need to know about self assessment tax returns as a landlord and how to complete them?

Do you need to report your rental income to HMRC?

• The first £1,000 of rental income you receive is tax-free. This is your property allowance.
• If you earn property rental income of £1,000-£2,000 a year, contact HMRC to find out how to report it.
• You must report property rental income via a self assessment tax return if it's between £2,500-£9,999 after allowable expenses or £10,000 or more before allowable expenses.

Need to know! Allowable expenses are costs you've paid to rent out your property that HMRC allows you to deduct from your income. Claiming allowable expenses will reduce your tax bill, so find out which ones you can claim. Government website GOV.UK lists allowable expenses that UK landlords can claim.

How to register for self assessment

• If you've registered for self assessment in the past, you don't need to register again. If you didn't send a self assessment tax return last year, you will need to reactivate your existing account by signing in.
• You'll need your Government Gateway user ID and password, as well as your Unique Taxpayer Reference (UTR) number. GOV.UK explains what to do if you've forgotten your Government Gateway user ID and password.
• If you're new to self assessment, you'll need to create a Government Gateway user ID by giving your name, email address, a password and a memorable recovery word.
• To register for self assessment, you'll then need to state your full name, postal address (which can be outside of the UK), date of birth, telephone number and UK National Insurance number. You'll also be asked why you're registering for self assessment. You'll then get your UTR (within 15 working days or 21 days if you live overseas).
• Once you've set up an HMRC online services account, you can sign into your personal or business tax account (to sort out your self assessment tax return).

Top tip! When registering for self assessment make sure you have all of the necessary information ready, because you cannot save a part-completed form.

Difference between self assessment for landlords and limited company directors

Most UK landlords are people who earn additional income from renting one or a few properties. They don't run professional property rental companies with extensive property portfolios, which is why most private landlords report their income to HMRC via self assessment, rather than filling in a corporation tax return and paying Corporation Tax.

However, even if someone is a private limited company director that rents out property and reports company income via corporation tax, they may still have to fill out a self assessment tax return to report personal taxable income. For example, if they earn more than £1,000 in share dividend payments or taxable income from self employment (eg a side hustle) or they have total taxable income of £100,000-plus in the tax year.

Need to know! If you rent out more than one property, your total profit/losses are added together before your tax liability is calculated. Profits/losses from overseas properties must be kept separate from UK properties, as these must be reported separately.

How to complete your self assessment tax return

First, collect all the information you need to complete your tax return, as it will save you lots of time.

• You'll need your ten-digit UTR number, which enables HMRC to identify you. You'll find it in previous tax returns and tax correspondence from HMRC.
• You'll also need your National Insurance number (it can be found in your Personal Tax Account, the HMRC app, previous payslips or P60s).
• You'll also need details of all income you've received within the tax year, which includes your gross rental income, but could also include income from self employment, employment, share dividends, pensions, savings interest, state benefits, capital gains from sale of assets, tips and commission.
• If you've used accounting software to detail your rental income and expenses, it will be far easier to enter summary figures in your tax return.
• In each income area, you'll also need summaries of tax expenses you wish to claim, which will include any expenses you've paid to rent your property (you also summarise this in your SA105).
• If you've paid into any pension schemes, you'll also need details.

Need to know! As well as the SA100 (the main self assessment tax return), landlords must also complete the SA105 supplementary pages, in which you detail your rental income and landlord expenses.

• There may be other supplementary pages to fill out. For example, if you're also a sole trader, you'll need to include the SA103 supplementary pages, summarising your self employed income and expenses. Members of ordinary business partnerships must file an SA104. At the same time, non-UK income or gains must be reported via an SA106 and an SA108 is used to report taxable capital gains from taxable asset sales. You can view the full list of supplementary pages on GOV.UK.

What if you're an expat landlord?

If you're an expat, UK income tax may be payable on income you earn from renting out UK property or land. Whether you pay UK tax and how much will be determined by how much you earn from renting out property and other sources.

You can either pay tax yourself via self assessment after collecting all of the rent. However, what's more common for expats (under the Non-resident Landlords Scheme) is your tenant (if their rent is more than £100 a week) or letting agent deducts the tax and pays it direct to HMRC, paying you the balance. You receive a certificate at the end of the tax year stating how much tax has been deducted, which will help you when you're completing your self assessment tax return.

Need to know! If you want to pay tax on rental income yourself via self assessment, you must apply to HMRC by filling in form NRL1i. If approved, HMRC will tell your letting agent or tenant not to deduct tax from your rent. HMRC will not approve your application if you have a history of being late with your tax returns or payments.

Copyright 2024. Sponsored post by Mike Parkes of GoSimpleTax - tax return software that can help you manage your self assessment.