Income Tax: Renting Out Property
You may have to pay tax on profit you make from renting out property.
Your profit is the amount left once you’ve added together your rental income and taken away the expenses or allowances you can claim.
Rental income is the rent you get from your tenants including any payments for:
- the use of furniture
- charges for additional services you provide such as:
- cleaning of communal areas
- hot water
- repairs to the property
Allowable expenses are things you need to spend money on in the day-to-day running of the property, like:
- letting agents’ fees
- legal fees for lets of a year or less, or for renewing a lease for less than 50 years
- accountants’ fees
- buildings and contents insurance
- maintenance and repairs to the property (but not improvements)
- utility bills, like gas, water and electricity
- rent, ground rent, service charges
- Council Tax
- services you pay for, like cleaning or gardening
- other direct costs of letting the property, like phone calls, stationery and advertising
You may be able to claim tax relief on money spent on replacing a ‘domestic item’. This is called ‘replacement of domestic items relief’.
Domestic items include:
- movable furniture for example beds, free-standing wardrobes
- furnishings for example curtains, linens, carpets, floor coverings
- household appliances for example televisions, fridges, freezers
- kitchenware for example crockery, cutlery
You must have only bought the domestic item for use by tenants in a residential property and the item you replaced must no longer be used in that property.
Property you personally own
The first £1,000 of your income from property rental is tax-free. This is your ‘property allowance’. This can be claimed or you can claim the actual expenses if this is more beneficial.
If you only rent out a room/space in your own home, you may be able to claim the Rent a Room Scheme allowance of up to £7,500 per annum. However, there are strict rules around claiming this relief and it may not be available in every circumstance.
MATCH is working hard to keep on top of all the latest news and government support so, as always, feel free to get in touch if you have any queries and we’ll be happy to help.
MATCH Accounting Limited