The consumer service Which? Has taken the unusual approach of setting out a 12 point guide to landlords about how to file their self-assessment tax returns for the 2021-22 tax year, which must be done within the next week by Tuesday January 31.
One of the points it makes is to remind landlords to offset licensing fees paid to the local council, if there are licensing regimes active in the areas where they own properties.
“Licensing schemes have been on the rise in recent years and that trend is continuing as more councils look to roll them out. Eligibility rules and costs of local licensing schemes vary significantly. In some areas, you might need to pay more than £1,000, but you will be able to deduct this as a business expense on your tax return” says Which?
Another point which some small-scale landlords may be unaware of is that if they made a profit of more than £6,725 from letting property in 2021-22, they may need to pay National Insurance if HMRC considers the property activities to constitute a business.
Which? says this is likely if being a landlord is your main job, you let more than one property or you're actively buying investment properties.
In more general terms, the consumer body points out that small costs such as phone calls and texts to tenants are often overlooked by landlords, but they are expenses which can also be offset. Travelling costs to your rented properties or paid-for subscriptions to industry publications can even be taken into account.
“Over the course of a year, you might be able to claim back more than you think. You will, however, need to have clear evidence of your outgoings and be able to prove they were exclusively for business use” it says.
Those landlords who are completing self-assessment returns but miss the closing date could be hit with an automatic £100 penalty plus further increases,
The Which? 12 top tips are here.
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Free information is always appreciated but a few bits not mentioned in the tax guidance tables.
Didn’t mention loosing my personal allowance and in effect paying over 60% then continuing from now as I understand it @ 45% up to £150k and not starting after that, what’s that another £5k to your tax Bill as well as taxing you on your personal allowance. Just add licensing Schemes and a raft of Requirements plus draconian penalties, some mugs game, but not to worry Lloyds/ Halifax are closing another 59 branches and will be replacing us steam rolling in to letting business with every cost possible allowable.
Interesting that HMRC can count us as a business when it wants us to pay NI but considers our income to be unearned investment income for other purposes so we can't get the tax benefits of paying it into a SIPP.
Convenient that although we're classed as investments HMRC can also see you as a business and take National insurance from you without giving you the same conditions as other businesses. They're walking all over us!
As I'm hands on I also claim a small amount to cover working clothes and the cleaning of them, every little bit helps.
And as Jo and Shane say above are we a business or is our income from an unearned investment ? can't be both .
I claim 45p for every mile on PRS business, 50% of all phone and broadband costs, 10% of the heating and council tax costs of our home ( for the room where PRS business is done).
I charge my wife £20 per hour for half of all hours spent on PRS business ( I'm not allowed to charge myself for my time on my half but we each charge each other for half our time spent on jointly owned rental properties).
The amount we can charge each other and have this as self employed earnings tax free is limited to £1000 each.
However even this restricted amount reduces our joint tax bills by £800 per annum.
I show this under management costs and put full details in the notes but i it's never been challenged so far.
Thanks Robert, hadn't thought of that one, I put a lot of hours in over the course of a yr so could charge my wife for half thereby reducing her tax, nice one .
Andrew
Remember it's limited to £1000 per annum each and should be lumped in with similar 3rd party costs but detailed in the notes which presumably are only looked at if something seems out of the ordinary.
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