Home > What are the benefits of online Self Assessment returns for landlords?

What are the benefits of online Self Assessment returns for landlords?

As a landlord you probably don’t think of yourself as a business owner, however being a landlord, you’re almost certainly self-employed or perhaps even a small business owner. What is for certain, HMRC does consider landlords receiving money from renting a property out to be in business. And landlords must complete a Self Assessment.

The majority of the UK’s two million landlords don’t set out to become landlords. Something tends to happen before a person becomes a landlord; perhaps they inherit property or money, move away with work, separate from a partner or can’t sell a property. But the accidental nature in which they become landlords can mean landlords fail to recognise they are ‘in business’ or that they have to pay tax on the money they earn through letting a property.

Even when you’ve come to terms with the fact that as a landlord you’re classed as being in business, the Self Assessment can seem intimidating to most people. Many people submit their paper returns before the end of October, however increasing numbers of landlords choose to submit their Self Assessment tax returns by the end of January - which is the online Self Assessment deadline.

What tax do landlords need to pay?

The government is proficient at finding new and interesting ways to change the taxation landscape. Sometimes landlords will benefit from these changes, whereas other times landlords will find themselves worse off. However, here are some of the key taxes landlords need to keep in mind:

  • Income tax
  • National Insurance Contributions (NIC)
  • Stamp Duty Land Tax
  • Capital Gains Tax

Stamp Duty Land Tax and Capital Gains Tax only needs paying when buying or selling property.

You need to register to pay tax via Self Assessment and you need to do it in good time to make sure you can receive unique taxpayer reference (UTR).

Paying online through the online Self Assessment is a really simple and effective solution for landlords when paying tax.

Through Self Assessment you’ll pay your income tax and National Insurance Contribution one each year, where the deadline is 31st January. If you’re trying to work out how much you are likely to pay as a landlord below will give you a feel for how to work it out.

What do landlords have to do in the online Self Assessment process?

So let's assume you’ve already registered for Self Assessment. The Self Assessment process for landlords is the same for directors and sole traders.

In order to complete your Self Assessment tax return, you will need to have the details of all your income and expenses from throughout the tax year.

Once you’ve completed your tax return you simply need to make a payment by the end of 31st January.

What expenses can a landlord deduct?

There has been a lot of changes to what can be deducted by landlords however here are some of the expenses landlords can deduct:

  • Property repair costs
  • Like-for-like renewals
  • Wear and tear allowance
  • Landlord energy savings allowance
  • Mortgage arrangement fees
  • Accounting fees
  • Insurance
  • Running costs
  • Letting agency fees
  • Service charges
  • Ground rent
  • Cleaning costs
  • Advertising costs

Changes to landlord taxation

The methods by which the government taxes landlords are changing all the time, so it’s always advisable to keep some money back in case there are some changes in landlord taxation that you’ve missed. Ultimately, the amount you pay will be determined by your own circumstances.

So should landlords complete a paper Self Assessment or online Self Assessment?

Of course, it’s entirely up to you as to whether you complete a paper Self Assessment or an online Self Assessment, probably the biggest advantage of the online Self Assessment is that you can put off submitting it to the end of January. On the other hand, submitting your Self Assessment early could give you plenty of time to pay the tax should there be something you don’t expect.

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