Do all landlords need to complete a tax return?

Whether or not a landlord needs to complete a tax return would depend on the level of profit generated by the rental portfolio. HMRC guidance states you must contact them if you have taxable profits from your rental property. The deadline for this notification is by 5 October following the tax year you had taxable rental profits.

There is an option for those with small amounts of profit of filing a tax return and paying taxes or getting their PAYE code adjusted with the level of profits. This will result in any tax payable being paid via their employment earnings. HMRC states that ‘it will ask for a return where rental income is £10,000 or more before allowable expenses’ and under this limit is likely to ask for a return where the rental income falls between ‘£2,500 to £9,999 after allowable expenses’.

However, if HMRC has issued a tax return, it has to be completed even if there is no tax to pay.

Property allowance

From 6 April 2017 you can get up to £1,000 a year in tax-free allowances for property income. If your annual gross property income is £1,000 or less, from one or more property businesses you won’t have to tell HMRC or declare this income on a tax return. Gross income means the total amount you would put on your tax return before any allowances or expenses are taken off. You must keep records of this income. This is known as ‘full relief’.

If you use the allowances you can deduct up to £1,000, but not more than the amount of your income. This is known as ‘partial relief’. If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income.

AJN Accountants are specialists in helping contractors, freelancers and small businesses to save tax and time.