Tax on rental income

If you let out all or part of a property (including your home), how you're taxed on the rent depends on the type of letting. If you let property abroad, you may have to pay UK tax on the rental income if you're resident in the UK for tax.

Tax on residential lettings

Letting residential investment property is treated as running a business - even if you only let out one property. And if you let out more than one property in the UK, they'll all be treated as a single business.

Whether you let one or several properties, you're taxed on the overall 'net profit'. You work this out by:

  • adding together all your rental income
  • adding together all your allowable expenses
  • taking the allowable expenses away from the income

Working out your net profit like this means that you can offset a loss from one property against the profit from others. Your net profit counts as part of your overall taxable income.

Comments

Post a Comment

Popular posts from this blog

First Accounting Period- Corporation Tax

It is very important to register for Corporation tax in the first year of trade if you start trading after your company setup date because this will decide how many tax returns you need to submit if your first year of accounting is more than one year. HMRC has given two clear example to explain the issue.   Example 1 (If registered for Corporation tax service before accounting reference date) Company set up date is 11 May 2014, started trading at 22 July 2014 , register for Corporation Tax 26 August 2014 and accounting reference date is 31 May 2015. In this case only 1 tax return covering period 22/07/2014 to 31/05/2015 need to be submitted plus year end accounts from 11/05/2014 to 31/05/2015. Example 2 (If registered for Corporation tax service after accounting reference date) Company set up date is 11 May 2014, started trading at 22 July 2014 and accounting reference date is 31 May 2015. In this case only 2 tax return covering period 11/05/2014 to 21/07/2014 ...
Read more

Rental Income Spouse

Where the married couple has rental income from property, they can reduce the taxes by doing some good tax planning. If the property is owned jointly, both can claim rental income 50:50 in their tax returns regardless of ownership ratio (which can be different from 50:50). So it means rental income sharing can be 50:50 if ownership ratio is 40:60 or rental income sharing can be 30:70 if the ownership ratio is 30:70 etc. What is not possible is rental income sharing of 10:90 and ownership ratio is 60:40. But in case of disposal of property capital gains or losses will be shared in the ownership ratio. No inheritance tax in case of gift of property between spouses if married couple have same domicile (Uk or Non UK).  Form 17 is required to be filled to HMRC if rental income is shared by married couple within 60 days. If the property is owned by single spouse or unmarried couple then Form 17 requirement does not apply. Lets see an example, A couple own a property which they let o...
Read more