How rental Income is Taxed
As a landlord you will need to pay tax on the property or properties you rent out.
Hopefully, this will be a quick and easy guide that will simplify how rental income is taxed.
As a landlord you are normally asked to pay income tax on any profit you make from renting out a property. This is the whole rental income less any expenses or allowances. Expenses can be maintenance, insurance, letting agent fees, council tax, water, gas, electricity, gardener, cleaner, legal fees, accountants’ fees etc. You can also claim for any rents, ground rents, service charges and for any direct costs, such as advertising for new tenants, phone calls, stationery etc.
You can no longer claim Mortgage interest as an expense but can claim 20% of the mortgage interest as a tax credit which is explained in a little more detail later on.
You can also claim for wear and tear on properties that are fully furnished but the Government only allows you to claim tax relief on monies spent replacing what it classes as 'domestic items', i.e., beds, sofas, carpets, curtains, crockery, cutlery or for white goods [fridges, freezers, cookers, microwaves] etc. Replacement must be like for like! You are also able to claim back the cost of disposing of items such as white goods.
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