“In this world nothing can be said to be certain except for death and taxes.” For anyone facing the self-assessment tax return deadline of 31st January, Benjamin Franklin’s words ring especially true. With income from property requiring reporting to HMRC, for landlords, being aware of tax requirements and being organised to file an accurate return – and have the funds available to make payment when due – can feel taxing in itself, but using a professional letting agent can at least help make the process easier.
For private landlords, income from property is subject to income tax. The first £1,000 income is tax-free and doesn’t have to be reported but after that threshold income up to £2,500 needs to be reported to HMRC whilst anything over £2,500 requires the landlord to submit a self-assessment tax return. For portfolio landlords earning more than £6,475 per year, running their rental properties as a business or as their main job, National Insurance Contributions are also payable. The deadline for an online submission is 31st January each year. Submissions for 6th April 2020 – 5th April 2021 must therefore be submitted by Monday to avoid deadline penalties.
The process itself is simple enough, requiring completion of the UK Property Section as this relates to rental income from inside the UK, but being organised is key to making the process as easy as possible, and this is where using a letting agent can help. HMRC requires landlords to submit information on rental income and requires details of rental periods, money spent on the property and rent received. Claimable expenses can be off-set against the income thresholds and can impact the amount of tax owed, and in some cases, the need to file a return, so keeping an accurate record of these expenses is vital. These costs include fees for professional services such as letting agents or accountants, or property maintenance such as gardening or cleaning, buildings and contents insurance, maintenance and repairs (although not property improvements), utility bills or council tax and direct costs such as mileage incurred travelling to tend to the property.
A large part of this information should be easily accessible if using a good letting agent. Tenancy documents stating rental periods will be provided for all tenancies, alongside clear rental statements listing all rental income and deductions for fees and maintenance costs with contractor invoices attached. It is also possible for agents to provide an annual rental statement summary for the required tax year, listing all total income and deductions in one easy format, divided according to each rental property, making the completion of self-assessment even easier. And if a piece of paperwork happens to go into hiding at your end, your agent should be able to easily provide you with a copy.
Professional landlords should also be mindful of their tax requirements and for complex tax circumstances – where rental portfolios are run as Limited company and subject to corporation tax, for example – landlords are advised to seek the advice of a tax accountant. However, for ensuring the required documents are readily available to simplify the reporting process, the use of a letting agent can certainly help.
Reliable admin can make self-assessment reporting far less taxing. For a fully managed service in King’s Lynn and West Norfolk, call is on 01553 692828 and let Brittons let for you.