Self Assessment for Buy-To-Let landlords
No one wants to pay tax but, unless you're an internet giant, it's a sad fact of life. For buy-to-rent landlords, this tax year has been a strain.
Apart from the usual pain of Self Assessment, 2017 has added another winkle. In April this year, the government reduced the tax relief landlords can claim.
Coming on the back of a rise in stamp duty, and the withdrawal of the energy savings allowance, it's understandable if landlords don't have the tax man on their Christmas card list.
Time is moving on
Self Assessment can be overwhelming. Particularly when the rules keep changing.
But, if you are a buy-to-let landlord, you do need to get your head around it. Especially as you will soon need to file your returns.
31 October 2017 is the deadline for paper returns. 31 January 2018 for online returns.
Is a landlord a business?
Something every landlord needs to recognise is that they are in business. You may not think of yourself as a businessperson. But the taxman certainly does.
Because you are a business you need to consider different taxes. The first thing you must do, if you haven't already, is register for Self Assessment.
Taxes landlords need to pay
Unfortunately, there is more than one. As a businessperson the main taxes you may be liable for include:
- Income tax
- Corporation tax
- National Insurance
- Stamp duty
- Capital gains
Of the above, some only apply when you buy or sell a property during the tax year.
You only have to worry about stamp duty when you buy a property.
Capital gains is tax you pay on the profit you make when you sell a property. The tax is only payable on the gains (profit). If you buy a house for £100,000 and sell it for £120,000 you pay tax on the £20,000 gains.
You will pay the other taxes on the list annually.
You will have to pay income tax and National Insurance on the income you earn from renting your property.
If you have registered as a limited company the business will also need to pay corporation tax. The company pays this tax on any profits it has made. If you are a director you will also be liable for income tax and NI if you take a salary out of the business.
A word about income
This isn't just the rent you receive from a tenant. It also includes any other payments your tenant makes to you. This could include service charges for example.
It's not all pay, pay, pay
As a business you are able to claim for expenses.
The rules of which deductions you can claim change frequently. This is where your accountant will earn their money. But make their job easy by saving every receipt and invoice you pay.
Some of the main expenses you can deduct from your bottom line include:
- Repairs to the property
- Routine maintenance (but not improvements)
- Insurances including buildings, contents and public liability
- Accountants and legal fees
- Fuel and running costs on vehicles you use for business
- Running costs such as stationery and phone calls
- Marketing activities
- Letting agent’s fees
- Fees to service providers such as plumbers
- Service charges including water rates, gas etc. Unless of course, your tenant pays these directly
Filing your tax return
Your accountant can do this for you. But if you are filing the return yourself you can do so online.
You will need your unique taxpayer reference number. HMRC will have provided this number when you registered for Self Assessment.
Always consult a professional when preparing your Self Assessment tax return.
An accountant is an essential member of the team for any business. He or she will be able to advise you and prepare your returns for you.
Your accountant is likely to save you more in tax than the fees you will pay them. And, remember, accountants fees are a deductible business expense.
MakeUrMove provide a wide range of services for landlords from finding and managing your tenants to ensuring all your legal compliances are up to date and a full property management service. For more information on all our services call us on 0333 8000 210.