Over the past few years the amount of tax payed by landlords has changed drastically, making working out the amount that you owe rather difficult and complicated.
Tax return for 2017-18 is due on 31st January 2019, so it is important to work out the changes as soon as possible.
Here we will go through useful things to know about your tax returns. The tips were made under the assumption that you own the properties as an individual and not a limited company.
Report your Income on a Cash Basis
Starting from the 2017-18 tax year, landlords are able to calculate their profits on a cash basis, this means that your tax bill will be based on how much your actually receive in rent during the year.
Previously things were different, and you had to pay tax based on earnings made, regardless of whether the money was actually received.
Weight up the £1000 Property Allownace
If you have earned less than £1,000 from your property, the new allowance makes it so you’re not required to declare it to HMRC. But if your income is higher than £1,000 you need to decide whether to apply the allowance or not.
If you choose to apply the allowance you will not be able to claim expenses or capital allowances. This could be worthwhile if you spent less than £1,000 in this tax year, but otherwise, you’re probably better off ignoring the allowance and claiming expenses instead.
Deduct Licensing Fees
Most landlords are now required to be licensed, due to the reclassification of Homes in Multjple Occupation and because councils are introducing their own schemes. While the cost can be hefty, you can generally deduct them from your profits as a legitimate business expense.
Read more: https://www.which.co.uk/news/2019/01/13-landlord-tax-tips-for-your-2017-18-tax-return/ – Which?