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A Beginner’s Guide to Declaring Your Property Income to HMRC

Published by Merisha Shrestha
Published Date: April 7, 2023

Managing taxes is a critical aspect of being a landlord when running a property business in the UK. However, given the rules and regulations, it can be intimidating to comprehend the complexities of self-assessment tax returns.

However, declaring your property income to HMRC is equally important. Not only is it a legal requirement, but it can also help you avoid penalties and ensure you're paying the appropriate taxes.

In this article, we'll take a closer look at how you can declare your property income. Whether you're an experienced property investor or a first-time landlord, the information we provide can help you stay on the right side of the law and maximize your returns.

Steps for Declaring Property Income

The steps you must take to declare your rental income are as follows:

Step 1: Registration 

You must register with HMRC as a landlord if your property income exceeds £1,000.

If you haven't previously registered for self-assessment, you must do so by 5 October, following the tax year you started collecting rental income.

Upon registration, you’ll receive a Unique Taxpayer Reference (UTR) number within 10 working days or 21 working days, if you’re overseas. Remember to keep this number safe, which will be used frequently throughout your tax journey.

Step 2: Self-Assessment Tax Returns

Although it may seem daunting, completing self-assessment tax returns is relatively straightforward since you only need to fill out the areas that apply to you. 

You must submit the SA105 page alongside the main SA100 self-assessment tax return page when reporting UK property income.

If you submit your self-assessment tax return to HMRC on paper, the deadline is 31 October;

If you submit it online, the deadline is 31 January following the tax year.

Step 3: Calculate Taxable Property Income 

Your taxable property income will be taxed at the same rate as the income you receive from non-savings income. To learn more about the tax rates, take a quick look at our Know Your Tax Rates article. 

HMRC permits you to deduct legitimate expenses such as repairs, maintenance, agent fees, accounting fees, operational expenses, etc., when calculating your taxable property income.

You should note that mortgage interest is no longer deductible (except for some exceptions). However, the good news is that you can claim a 20% tax credit on your mortgage interest payments.

Step 4: Pay Your Tax Bill

Payment is easy and can be made through the HMRC website.

Seven payment options are available, based on your preferences, such as debit card, online banking, CHAPS, credit or debit card, bank or building society, Bacs, and cheque.

Depending on the method you select, you could have to wait up to five working days, so it's best not to wait until the last minute.

Step 5: Keep Accurate Records

It's essential to keep accurate records of your rental income and expenses.

This will assist you in appropriately filling out your tax return and act as proof if HMRC decides to investigate your tax issues.

Step 6: Report Any Changes

You must notify HMRC as quickly as possible if your circumstances change, such as when you stop renting out a home or buying or selling a property.

Conclusion

In summary, declaring your property income to HMRC is essential to all property owners and landlords. This will help you comply with the law and ensure you're paying the right amount of tax on your rental income.

By following the steps detailed in this article, you'll be equipped with the knowledge to declare your property income accurately. Taking action to declare your income will not only protect your finances but will also help you avoid penalties and ensure that you can focus on maximizing your returns.

Merisha Shrestha
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