If a UK resident person gets rental income (either from UK Property or Overseas property) or capital gains from selling the properties, the landlord needs to prepare and file a Self-Assessment Tax return with HMRC, usually referred to as Self-Assessment return (SA100).
Similarly, if a non-UK resident person gets rental income from UK Property, the overseas investor needs to prepare and file a Self-Assessment tax return with HMRC.
Who needs to file a Self-Assessment Tax return in the UK?
Generally, if you have any taxable income not already taxed, you must file a Self-Assessment return with HMRC. If you only have employment income taxed under PAYE, you don't need to file a Self-Assessment Tax return.
Usually, the following people need to file a Self-Assessment return with HMRC:
What is the deadline for the Self-Assessment tax return?
A tax year runs from 6 April to the following 5 April in the UK. So, for example, the tax year 2022/23 runs from 6 April 2022 to 5 April 2023.
The deadline for an online filing tax return is 31 January, following the end of the tax year. For the tax year 2022/23, the deadline for filing a tax return is 31 January 2024. However, if you are filing a paper return, the deadline is 31 October in the same year as the tax year's end. For the tax year 2022/23, the deadline for filing a paper return is 31 October 2023.
Are there any penalties for late filing?
If the tax return is filed late, the initial penalty is £100. This penalty is levied even if there is no tax liability. Additional daily penalties of £10 per day will be charged in respect of returns that are more than three months late up to a maximum of £900.
If you are six months late, there will be a penalty of 5% of tax liability (or £300 if greater). For being more than 12 months late, there will be an additional 5% of tax liability (or £300 if greater). So, it is best to file the tax return on time.
In addition to these late filing penalties, you will incur late payment penalties for missing the payment deadline.
What is the deadline for payment of tax liability?
The taxpayer needs to pay the income tax liability in three instalments on a payment on account basis which means the tax is due even before you have prepared your self-assessment tax return. The deadline for making payment of income tax liability is as below:
31st January - 50%
50% of previous year tax liability is payable by 31 January during the tax year. For example, for tax year 2022/23, 50% of 2021/22 tax liability is payable on 31 January 2023 as payment on account.
31 July - 50%
50% of previous year tax liability is payable by 31 July during the tax year. For example, for tax year 2022/23, 50% of 2021/22 tax liability is payable on 31 July 2023 as payment on account.
31 January -
Balancing figure of tax liability is payable on 31 January as per final self-assessment tax return. For example, for tax year 2022/23, balancing figure is payable on 31 January 2024 as per the tax computation.
HMRCWhat if you never completed a tax return before?
For the first-time Landlord, this is quite a common question. If you were used to receiving only employment income taxed via PAYE, you never had to complete a tax return. However, once you start receiving rental income, you must complete your tax return and pay any taxes due to HMRC.
You will need to notify HMRC by 5 October following the end of the tax year if you have any taxable income or capital gains. For example, if you started to receive taxable income during the tax year 2022/23, you will need to register with HMRC for tax return by 5 October 2023.
Generally, even if you failed to notify HMRC before the deadline of 5 October, HMRC may reduce your late-notification penalty to Zero if you pay your tax in full by the usual 31 January deadline.
I stopped receiving rental income. Do I still need to complete my tax return?
Once you register with HMRC for a self-assessment return, you will need to file the tax return even if you don't have any income. Otherwise, you will receive a late filing penalty from HMRC.
To avoid this, you will need to notify HMRC about your changed circumstances and ask to cancel your tax return filing requirements.
How can I complete my tax return?
You can either complete your tax return yourself or use accountancy firms such as UK Property Accountants to complete your tax return. If your tax return is simple and you are confident about filing a tax return, it would be cost-effective to do it yourself. However, you will need to carefully assess that you understand rules around various areas, including repairs vs capital, potential tax reliefs and allowances, etc., before deciding whether to do tax return yourself or engage a professional accountancy firm.
If you decide to file a tax return yourself and do this for the first time, you will need to create a Government Gateway account and Register for Self Assessment as detailed on the HMRC website. Once you have accessed your Government Gateway account, you will be able to complete your tax return online.