Landlord Property Tax

Landlord Tax Guide

Due to the recent changes imposed by the Chancellor, the buy to let market has become more challenging and stressful for the landlords. Whether you are an experienced or a first-time buyer, it's crucial to understand how property taxes work to gain maximum return out of your investment.

DNS Accountants are qualified property tax accountants specialised in providing tax services to landlords and investment property holders. We work for a vast number of clients with property portfolios, including non-resident investors, residential and commercial property holders & developers, corporate and individual investors. Our expert accountant's property specialists follow a proactive approach to ensure you take advantage of the tax reliefs available and are one step ahead of constant tax changes.

What is income from house property?

Income from house property is considered as rental income of property according to the Income Tax Act. The property can be a building or the land adjoining it and is taxed under Section 24 under the head 'income from house property'.

Rent received from a commercial property, or a residential house is taxable under the same head.

Who will pay the property tax: the owner or the tenant?

Ideally, it is the duty of the landlord to pay the property tax except nothing is mentioned explicitly in the contract between the landlord and the tenant. In certain circumstances, tenants can pay property tax and get the amount adjusted from the monthly rent. It is a matter of Rent agreement or Lease Deed, which is signed between the tenant and the landlord to determine who is responsible for paying the tax. If proper tax planning is not put in place, a large part of your rental income could be lost in paying taxes.

What are your financial responsibilities as a landlord?

There are many financial and administrative responsibilities you need to perform as a Landlord. A landlord accountant helps guide how to register for self- assessment and complete annual tax returns for the rental income received by the landlord. Similarly, if a limited company owns the property, you must submit annual accounts and tax returns. 

Along with the countless other responsibilities you have as a landlord, the financial landscape can be complex and onerous to navigate, even for the most experienced landlords. Accountant property specialists can help relieve the burden, allowing you to concentrate on the other aspects of being a successful landlord.

Why do landlords need a property accountant?

Not everyone is aware of the proper way to report rental income on their taxes. By obtaining the services of a landlord accountant, you eliminate the possibility of making a careless error. Finally, it's your accountant who will be able to tell you how rental income is taxed, what deductions you may claim, and which receipts you must keep in your records. Thus, we recommend you hire an accountant with expertise in property taxation. Accountants property specialists can also assist you if you are unsure whether to own property in your personal name or through a limited corporation.

Landlord property taxes, and how can we help?

The primary three taxes that apply to the UK landlord are - Stamp Duty Land Tax, Capital Gains Tax, and Income Tax. However, you do not pay them all at the same time. You pay Stamp Duty on the initial property purchase and Capital Gains Tax on the sale of an investment property. Income Tax is the only ongoing tax you will pay as a private landlord on owned buy-to-let property. If you purchase a buy-to-let property in the UK through a limited company, you will instead pay Corporation Tax on the rental income.

Keeping track of capital gains tax, stamp duty, corporation tax, expenses, and the huge number of other considerations that landlords face can be a challenge. Our accountant's property specialists will tell you everything you need to know and do about the property taxes you'll pay as a landlord, including how to ensure you're paying your fair share. We'll define key terms and provide you with the most up-to-date information on all things related to property tax in 2021/22.

When you buy property - stamp duty

If you buy a property over a certain price in the UK, you are eligible to pay tax.

For the exact tax the person has to pay and the specific value of the property varies as it depends on your location and circumstances, hence it's better to seek advice from the landlord accountant as this can also help in considering the capital gain tax.  

While you’re letting property – income tax

If you are earning money from letting a property then the person have to complete a self-assessment tax return, depending on your total income. The rate at which the income tax is calculated depends on the income you earn.

What are self-employed landlords allowed to claim as income tax expenses?

There is a checklist which HMRC provides to know allowable income tax expenses for landlords. To know what you are allowed to claim depends on the kind of property (letting a residential property, a furnished holiday let or a commercial property).

Here is a checklist which residential landlords can claim including:

• Bad debts
• Utility bills and council tax (while the property is unoccupied)
• Fees for services by professionals like accountants, letting agents, solicitors or surveyors
• Business costs like phone calls, travel and running a home office
• Repairs to and replacements for the property
• Ground rent on the property
• Interest on loans and credit purchases