Residential Landlords: Your Annual Rental Tax Returns, made easier

4 January 2019

April 2018 saw the phasing in of changes to tax relief for residential landlords.

The changes will restrict the tax relief that landlords of residential properties get for finance costs to the basic rate of Income Tax, a process that will be fully in place from 6 April 2020. The rate of tax residential landlords will pay on rental income will be dependent on total income for the year, to include not just rental income, but also any other income stream such as wages or a pension.

The changes to tax relief for residential landlords mean it's more important than ever to ensure they claim all allowable expenses against their rental income, in order to reduce tax liabilities as much as possible. Allowable expenses are defined by HMRC as "expenses incurred wholly and exclusively for the property rental business", products or services purchased for that specific property. Typical maintenance and repair costs, such as repairing or replacing, repainting and redecorating (but not improving) are allowable expenditure.

Residential landlords that have properties with uncommercial lets, (for example to a relative or a friend for a reduced rent) may only deduct expenses up to the amount of rent received for that property.
If a rental property is jointly-owned, but not by spouses or civil partners, individual landlords are taxed according to their share of the property.

Residential landlords who are also in employment during the financial year will pay tax on total earnings but will need to evidence this on a Self Assessment tax return, to avoid errors due to tax miscalculations.

Tax returns can be complicated enough without trying to understand how you will be affected by the changes and the transition to that change over the coming years.

Let us help. Call us today and we'll make your Annual Tax Return easier.

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