If you rent out a property you need to report the income and expenses incurred to HMRC

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Property tax

If you rent out a property in the UK you need to declare the income to HM Revenue & Customs as under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.

Indeed if you are currently making losses, by submitting a tax return you are recording these losses.

There are various types of UK property income which have different tax rules :-

Residential Properties

There are two types of residential property income being unfurnished property lettings and furnished property lettings. The main difference is if a property is fully furnished you can claim 10% of the net rent as wear & tear allowance for furniture and equipment you have provided.

Furnished Holiday Lettings

These are treated separately to the above because Furnished holiday Lettings qualify for the following:-

  • Plant and machinery Capital allowances
  • Business Asset holdover Relief for Capital Gains Tax
  • Can claim Entrepreneurs relief on disposal

However to claim the income as Furnished Holiday lettings you need to fulfil the following criteria:-

  • The property is offered to let for at least 210 days per year
  • It’s let for more than 105 days per year
  • No single let is more than 31 days
  • You charge the going rate for similar properties in the area

Commercial Properties

You can claim plant and machinery capital allowances on some items if you rent out a commercial property like a shop, garage etc.

Allowable Expenses

Whether you have a buy to let property, or are renting out your old home or you have a portfolio of properties you need to split expenditure between allowable expenses and Capital expenditure ie mortgage payments are likely to be in two parts being Capital repayment of the original loan and interest payment. Therefore it is possible you will have a tax liability despite paying out more than you receive each month.

Tax Enquiries

One of the specialist areas HMRC is currently reviewing is Let Property. It is therefore important that you keep all records etc so if challenged by HMRC you can provide the documentation to support your tax returns.

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