Tax requirements for landlords: what do you need to know?

Everything from basic obligations to the most recent tax changes, explained

Landlord Advice

24 July 2017

Since 2016 there have been lots of buy-to-let tax changes, the most recent of which came into effect in April 2017. So now is a sensible time to take a look at your obligations.

By looking ahead, understanding the changes and reassessing your income, you’ll be able to budget more effectively and avoid the last-minute panic when deadlines approach.

Basic obligations

Rental income is taxable, and the amount you’ll pay is charged as part of your income tax calculation. That means you have to declare your earnings to HMRC, usually by filing a self-assessment tax return. You might also have to pay Class 2 National Insurance on your earnings.

The tax year runs from April to April, but tax returns generally don’t have to be submitted until October (for paper returns) or the following January (for online submissions). The latest deadlines can be found on GOV.UK

Doing the sums

As well as keeping track of your rental income, you should keep records and paperwork for all of your expenses. That’s because the amount of tax you’ll pay also depends on how much you spend maintaining your property.

Lots of costs are counted as allowable expenses. These are deducted from your earnings, lowering the amount that you’re taxed on. That’s why they’re sometimes called deductibles.

Examples of deductible expenses include landlord insurance, contents insurance, letting agent fees, maintenance and repairs.

Changes to note

For the 2017/18 tax year, there are a few big changes to keep in mind when you’re doing the books and planning your spending. They are...

  • Finance cost relief. Previously, interest on your mortgage and property loans counted as an allowable expense. From 2017/18 to 2021, it will be phased out and replaced with a flat rate of relief equal to the basic tax rate.
  • Wear and tear allowance. From 2017/18, the flat allowance for general wear and tear is being removed. Instead you can only claim for actual expenses, so keeping receipts and records is even more important.
  • Stamp Duty. If you’re saving to invest in another residential property, remember that from April 2016 everyone who already owns a property has to pay an extra 3% surcharge on top of standard rates.

Covering yourself

Keeping an eye out for changes like these is vital to ensuring you get your tax return right. Mistakes can lead to missing out on tax savings or even a fine from HMRC, and interest charges on unpaid taxes.

If you’re unsure of any aspect of your obligations or how to complete them, it’s sensible to seek advice from a qualified professional.

You can also protect yourself from the unexpected with buy-to-let insurance, which provides cover against a range of possible pitfalls.


Make the best first impression with AXA landlord insurance 

First impressions matter. That’s why if you’re a landlord, it pays to get protected from day one with cover available from as little as * a year.

  • Buildings insurance to repair or rebuild your property following a loss
  • Property owners’ liability cover (up to £10 million)
  • Cover to re-house your tenants in alternative accommodation
  • Cover for up to 10 properties in one policy
  • 0% interest on instalments when you choose to pay monthly

Get a quote now