When you start to rent out property this is known as untaxed income. Therefore you should inform HMRC straight away when you start to receive rental income. This can be done online or via the telephone however you may wish to appoint an accountant. By informing HMRC you will receive a self-assessment form where your rents can be detailed along with your other income.
Tax is payable on the net rents after the deduction of expenses. Expenses can include:
- Letting fees
- Mortgage interest
- Gas / Electric checks
- Accountancy costs
The tax rate is the rate of tax you fall under with your other income however beware as rental income could put you in a higher bracket.
In the summer budget 2015 there were some wide ranging changings to how net rental income is calculated included the loss of a fixed 10% allowance and the restriction of mortgage relief for higher rate tax payers. Therefore if you are unsure we would advise contacting an accountant.
The advice above is from local Chartered Accountants J F Hornby & Co whom we are happy to recommend. They are a family run organisation who are extremely attentive and will ensure you receive the maximum amount of tax relief available. They act for many landlords in the area some of which have numerous properties therefore they are very experienced. To contact them please visit www.jfhornby.com or call 01229 588077 and ask for either Paul or Tom who would be delighted to help you...