Property tax services / United Kingdom / FAQs

FAQs

  • I rent out a number of properties. Do I have to file a tax return?
    1. If you are non-UK resident landlord, you must declare your UK property income on a UK self-assessment tax return.
    2. If you are UK tax resident , you must file a UK tax return if you are in receipt of property income of:

      • £2,500 or more after deducting allowable expenses; or
      • £10,000 or more before deducting allowable expenses

    In other cases, HMRC can make an adjustment to your PAYE code to collect any tax due on such income. Your PTI Account Manager can provide you with more information about the self-assessment system or PAYE coding.

  • What is a ‘property business’ defined as?
    • rental income and other receipts from UK land or property
    • income from letting furnished rooms in your own home
    • income from Furnished Holiday Lettings (FHL) in the UK or European Economic Area (EEA)
    • premiums from leasing UK land
    • inducements to take an interest in letting a property (a reverse premium)
  • Do I have to pay Class 2 National Insurance?
  • Class 2 National Insurance contributions are due only if the tax payer is self-employed.

    You have to pay Class 2 National Insurance if your profits are over £5,965 a year and what you do counts as running a business, for example if all the following apply:

    • being a landlord is your main job
    • you rent out more than one property
    • you’re buying new properties to rent out

    If your profits are under £5,965, you can make voluntary Class 2 National Insurance payments, for example to make sure you get the full State Pension.

    You don’t pay National Insurance if you’re not running a business - even if you do work like arranging repairs, advertising for tenants and arranging tenancy agreements.

  • Do I pay tax if I am a UK non-resident landlord?
  • You have to declare your property income and expenses on a UK self-assessment tax return. However, whether tax liability arises depends on the level of your rental business profit, the availability of specific allowances and the amount of the tax deducted at source from the gross rent received (if any).
  • What are allowable / deductible expenses?
  • 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
    • interest on property loans (please note that new rules are in force since 5 April 2017)
    • 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
  • What are the tax rules regarding capital expenditure?
  • Allowable expenses don’t include ‘capital expenditure’ - like buying a property or renovating it beyond repairs for wear and tear.

    Expenses are generally ‘capital expenses’ when you:

    • add something to the property that wasn’t there before
    • alter, improve or upgrade something that was existing
    • include the purchase of furnishings and equipment for the property

    Capital expenses aren’t allowable and can’t be claimed against your rental income but you should keep records of them as you might be able to set them against Capital Gains Tax if you sell the property in the future.

  • Yes. You must file a UK tax return if you are in receipt of property income of:

    - £2,500 or more after deducting allowable expenses; or
    - £10,000 or more before deducting allowable expenses

    In other cases, HMRC should make an adjustment to your PAYE code to collect any tax due on such income. Your PTI Account Manager can provide you with more information about the self-assessment system or PAYE codings.
  • What is Rent-a-Room relief?
  • The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

    You can let out as much of your home as you want.
    You must complete a tax return if you earn more than the threshold.

  • Are there any special tax rules for non-resident landlords?
  • You need to pay tax on your rental income if you rent out a property in the UK.
    You may also need to pay tax if you make a gain when you sell residential property in the UK.
    If you live abroad for 6 months or more per year, you’re classed as a ‘non-resident landlord’ by HM Revenue and Customs (HMRC) - even if you’re a UK resident for tax purposes.

    Letting agents or tenants of a non-resident landlord must:

    • deduct tax from the landlord’s UK rental income; and
    • pay the tax to HMRC
  • Change of Capital Gains Tax for non-UK Residents from 06 April 2015
  • CGT legalisation is complex but a summary of the changes for Non Resident Landlords is as follows:

    Letting agents or tenants of a non-resident landlord must:

    • You may also need to pay tax if you make a gain when you sell residential property in the UK.
    • In addition, a taxpayer disposing of UK residential property is required to inform HMRC within 30 days of the property being conveyed that the disposal has occurred.
    • Losses on disposals of UK residential property will be ring-fenced for use against gains on other UK residential properties arising to the same non-UK resident individual in the same or future years.
    • If a non-resident becomes UK resident, any unused UK residential property losses will be available as general losses against other types of capital gain from that point.
    • If the non-resident is categorised as a UK self-assessment taxpayer, the CGT liability arising can be paid through the normal filing process. Otherwise the vendor will need to make an “advance self-assessment” and pay their tax to HMRC within 30 days.

    Your PTI Account Manager can provide more detail on the Capital Gains Tax rules.

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