Landlord Self Assessment tips – how to complete your tax return
Many UK landlords, possibly you included, do their own annual Self Assessment tax returns, even though it’s a task that most dislike. It’s boring and it takes up precious time you would rather spend doing anything else.
But you can save a few quid if you do it yourself and if you’re armed with some basic knowledge, you can get it done in less time. As with other things, sound preparation really pays off. So, what do you really need to know about Self Assessment tax returns and how to complete them?
Do you need to report your rental income to HMRC?
- The first £1,000 of rental income you receive is tax-free. This is your Property Allowance.
- If you earn property rental income of £1,000-£2,000 a year, contact HMRC to find out how to report it.
- You must report property rental income via a Self Assessment tax return if it’s £2,500-£9,999 after allowable expenses or £10,000 or more before allowable expenses.
Need to know! Allowable expenses are costs you’ve paid to rent out your property that HMRC allows you to deduct from your income. Claiming allowable expenses will reduce your tax bill, so find out which ones you can claim. Government website GOV.UK lists allowable expenses that UK landlords can claim.
How to register for Self Assessment
- If you’ve registered before for Self Assessment, you don’t need to register again. If you didn’t send a Self Assessment tax return last year, you will need to reactivate your existing account by signing in.
- You’ll need your Government Gateway user ID and password, as well as your Unique Taxpayer Reference (UTR) number. GOV.UK explains what to do if you’ve forgotten your Government Gateway user ID and password.
- If you’re new to Self Assessment, you’ll need to create a Government Gateway user ID by giving your name, email address, a password and a memorable recovery word.
- To register for Self Assessment, you’ll then need to state your full name, postal address (which can be outside of the UK), date of birth, telephone number and UK National Insurance number. You’ll also be asked why you’re registering for Self Assessment. You’ll then get your UTR (within 15 working days or 21 days if you live overseas).
- Once you’ve set up an HMRC online services account, you can sign into your personal or business tax account (to sort out your Self Assessment tax return).
Top tip! When registering for Self Assessment, have all of the necessary information ready, because you cannot save a part-completed form.
Difference between Self Assessment for landlords and limited company directors
Most UK landlords are people who earn additional income from renting one or a few properties. They don’t run professional property rental companies with extensive property portfolios, which is why most private landlords report their income to HMRC via Self Assessment, rather than filling in a Corporation Tax return and paying Corporation Tax.
However, even if someone is a private limited company director that rents out property and reports company income via Corporation Tax, they may still have to fill out a Self Assessment tax return to report personal taxable income. For example, if they earn more than £1,000 in share dividend payments or taxable income from self-employment (eg a side-hustle) or they have total taxable income of £100,000-plus in the tax year.
Need to know! If you rent out more than one property, your total profit/losses are added together before your tax liability is calculated. Profits/losses from overseas properties must be kept separate from UK properties, as these must be reported separately.
How to complete your Self Assessment tax return
First collect all of the information you need to complete your tax return, as it will save you lots of time.
- You’ll need your ten-digit UTR number, which enables HMRC to identify you. You’ll find it in previous tax returns and tax correspondence from HMRC.
- You’ll also need your National Insurance number (it can be found in your Personal Tax Account, the HMRC app, previous payslips or P60s).
- You’ll also need details of all income you’ve received within the tax year, which obviously includes your gross rental income, but could also include income from self-employment, employment, share dividends, pensions, savings interest, state benefits, capital gains from sale of assets, tips and commission.
- If you’ve used accounting software to detail your rental income and expenses, it will be far easier to enter summary figures in your tax return.
- In each income area, you’ll also need summaries of tax expenses you wish to claim, which will obviously include expenses you’ve paid to rent your property (you also summarise this in your SA105).
- If you’ve paid into any pension schemes, you’ll also need details.
Need to know! As well as the SA100 (the main Self Assessment tax return), landlords must also complete the SA105 supplementary pages, in which you detail your rental income and landlord expenses.
- There may be other supplementary pages to fill out. For example, if you’re also a sole trader, you’ll need to include the SA103 supplementary pages, summarising your self-employed income and expenses. Members of ordinary business partnerships must file an SA104, while non-UK income or gains must be reported via an SA106 and an SA108 is used to report taxable capital gains from taxable asset sales. You can view the full list of supplementary pages on GOV.UK.
Three ways to complete your Self Assessment tax return
1 Do it yourself via GOV.UK
You can complete and file your Self Assessment tax return online via GOV.UK. You’ll need to sign in using your Government Gateway user ID and password. The only online guidance you’ll get comes from notes HMRC publishes online. These may or may not answer any questions you have. If you lack experience, it can take you longer to complete your tax return and mistakes are more likely.
Did you know? The time it takes most people to complete their Self Assessment tax return if they prepare properly is three hours.
2 Pay an accountant to complete your Self Assessment tax return
If you really don’t have the time or inclination, an accountant will complete and file your Self Assessment tax return for you. It will cost £150-£300 (more if your tax affairs are more complex). Mistakes are unlikely, while an experienced accountant should be able to ensure that you claim for all of your allowable expenses (some charge more for this). Although you’ll need to ensure that they have all of the information they need, if you can afford it, this is likely to be the easiest option, but not the cheapest.
3 Use Self Assessment tax return-filing software
Many UK landlords use commercial Self Assessment tax return-filing software, which makes things much easier and quicker. You specify which taxable income you need to report and the software loads up the necessary tax return supplementary pages. You’re guided through sections that you need to complete, while automatic prompts are designed to prevent errors.
Need to know! Using Self Assessment tax return-filing software really does make the task much easier, which saves you time. A yearly subscription will cost about £50, which is much less than an accountant would charge to complete your tax return.
What if you’re an expat landlord?
If you’re an expat, UK Income Tax may be payable on income you earn from renting out UK property or land. Whether you pay UK tax and how much will be determined by how much you earn from renting out property and other sources.
You can either pay tax yourself via Self Assessment after collecting all of the rent. However, what’s more common for expat (under the Non-resident Landlords Scheme) is your tenant (if their rent is more than £100 a week) or letting agent deducts the tax and pays it to HMRC, paying you the balance. You receive a certificate at the end of the tax year stating how much tax has been deducted, which will help you when you’re completing your Self Assessment tax return.
Need to know! If you want to pay tax on rental income yourself via Self Assessment, you must apply to HMRC by filling in form NRL1i. If approved, HMRC will tell your letting agent or tenant not to deduct tax from your rent. HMRC will not approve your application if you have a history of being late with your tax returns or payments.
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