Landlords

Income Tax and Self Assessment Tax Returns

Reporting rental income to HMRC means filing a self assessment tax return to pay income tax on your declared rental income.

Accurately completing the self assessment form is crucial for tax filing, ensuring all financial details are correctly reported.

All those eligible expenses—utilities, insurance, agent fees, repairs—get properly claimed for tax purposes, so your tax bill stays as low as possible.

We keep your records organised through the year. When tax time comes, things are a lot less stressful (and you’re less likely to get a nasty surprise).

Understanding the concept of profit is essential for complying with tax obligations and maximising financial benefits in property investment.

Quarterly reviews of your tax position help you plan ahead—nobody likes a big, unexpected bill at the end of the year.

HMRC Requirements and Deadlines

Missing HMRC deadlines and facing tax liability? Bad idea. The Self Assessment deadline is 31 January after the tax year ends (5 April), and missing it means a £100 fine right off the bat, with more to follow if you don’t get sorted.

We set up reminders so you don’t miss a thing—tax returns, payments on account (due 31 January and 31 July), and any other HMRC letters that might land in your inbox.

If HMRC comes calling with questions or an investigation, we’ve got your back. We keep detailed records, so you’ve got an audit trail if you ever need it.

Making Tax Digital (MTD) is rolling out for landlords, too. We’ll help you get your systems up to speed so you’re not caught out by new digital rules.

National Insurance

Most landlords don’t pay National Insurance Contributions (NICs) on rental income—unless letting property is basically your full-time business. We’ll look at your situation and let you know if you’re on the hook for Class 2 NICs.

If your property business is big enough, Class 2 NICs for 2024/25 are £3.45 a week for earnings above £12,570. We’ll explain how this affects you and if there are any reliefs or exemptions you can claim, especially if you’re self-employed elsewhere.

We’ll also make sure your National Insurance record stays complete, so your state benefits and pension aren’t at risk—even if you’re not paying NICs on rental income.

Mortgage Interest and Maintenance Costs

Since April 2020, you can’t just deduct mortgage interest from rental income anymore. Instead, you get a basic rate tax credit (20%) on finance costs. We’ll make sure this is calculated correctly on your tax return, including accurately transferring data about money spent or received into your accounting systems.

Being tax efficient is crucial for landlords, especially with rising mortgage rates and complex tax regulations. Consulting property tax specialists can help you navigate tax structures effectively, save on taxes, and protect your wealth.

Claiming maintenance costs? We’ll help you keep track of things like:

• Repairs and redecorating

• Replacing domestic items (under Replacement Domestic Items Relief)

• Ground rent and service charges

• Buildings and contents insurance

It’s important to know the difference between capital improvements (which affect Capital Gains Tax) and revenue repairs (which you can deduct right away). We’ll help you get this right—it’s trickier than it sounds.

We’ll also advise on timing major repairs to get the best tax result, especially if you own more than one property.

Capital Allowances and Capital Gains Tax

If you’ve got furnished holiday lets or commercial properties, there are ways to claim capital allowances on things like furniture and equipment, which can qualify as business assets for tax reliefs. It can make a real dent in your tax bill.

Understanding how losses impact future profits is crucial for landlords, as losses from rental activities can only be offset against future profits from the same rental business.

Selling a property? Capital Gains Tax (CGT) comes into play. We’ll work out your CGT liability and look for reliefs such as:

• Private Residence Relief

• Letting Relief (in certain cases)

• Business Asset Disposal Relief (if you qualify)

If the property is your main residence, you may be eligible for Capital Gains Tax exemptions, which can significantly reduce your tax liability.

Timing is everything with property sales. We’ll help you use your annual CGT exemption and keep the tax hit as low as possible.

We can also talk inheritance tax planning if you’re thinking long-term about passing property to family or others. Additionally, various ownership arrangements and tax implications for property investments can help mitigate tax liabilities for landlords.

Advanced Tax Issues for Property Owners

There’s more to property tax than just income tax; advanced tax issues can significantly impact your tax liability. Some of the rules are complicated, and getting them wrong can be expensive. We help you steer clear of common pitfalls.

Understanding the various implications of taxes for landlords is crucial, including income tax, capital gains tax, and inheritance tax. Choosing the right ownership structure is essential for optimising tax efficiency and effectively managing tax liabilities.

VAT Implications and Service Charges

VAT and property? It’s rarely straightforward. Most residential lettings are exempt, so you can’t charge VAT on rent or reclaim VAT on expenses. But if you start offering extra services, you could suddenly have a VAT problem on your hands.

With commercial properties, you can opt to register for VAT if it’s used for business. That lets you reclaim VAT on costs but means you have to charge VAT on rent, too.

Collecting service charges and passing them to a management company? Usually, there’s no VAT issue if you’re just the middleman. But if you’re directly providing services and your turnover tops £90,000, VAT registration could become necessary.

It’s wise to keep thorough records of service charges—HMRC likes to take a close look at these.

Furnished Holiday Lettings and Private Residence Relief

Furnished Holiday Lettings (FHLs) are a bit of a niche but can be tax-friendly if you tick the right boxes:

• Available for commercial letting at least 210 days a year

• Actually let for at least 105 days

• No one stays longer than 31 days at a time, typically

If you qualify, you get perks like:

• Capital allowances on furniture and fittings

• Claiming pension contributions against rental income

• Potential eligibility for Entrepreneurs’ Relief on sale

• Qualifying as business assets for tax reliefs like Business Asset Disposal Relief and Business Relief

Designating one property as your main residence is crucial for favorable tax treatment, impacting taxes like Capital Gains Tax and Stamp Duty Land Tax.

Additionally, leveraging profits from furnished holiday lettings for pension purposes can benefit your retirement savings and tax considerations.

Private Residence Relief (PRR) means you don’t pay CGT on your main home. You can claim full PRR for the time you lived there, plus the last nine months of ownership. If you let out part of your home, you might also get up to £40,000 in Lettings Relief.

Stamp Duty and Tax Implications of Lettings

Stamp Duty Land Tax (SDLT) hits when you buy property in England or Northern Ireland. If you already own a place, you’ll pay an extra 3% on top of the usual rates for another residential property owned, which can have significant tax implications.

Being tax efficient is crucial for landlords, especially with rising mortgage rates and complex tax regulations. Consulting our property tax specialists can help you navigate tax structures effectively, save on taxes, and protect wealth.

Companies buying residential property worth more than £500,000 might face a flat 15% rate—unless it’s genuinely for letting or business use, including commercial property, which has its own financial aspects and tax implications.

If you’re swapping your main home, you can get relief from the 3% surcharge, but you’ll need to sell your old home within 36 months to claim a refund.

SDLT deadlines are tight—returns and payments have to be in within 14 days of completion, or you’ll get hit with penalties and interest.

It’s worth thinking about SDLT early when planning any property investment, since it can really eat into your returns if you’re not careful.

Accounting Methods and Compliance Considerations

Picking the right accounting method and managing accounts efficiently is essential for landlords. The UK has some strict requirements on how you report your property finances to HMRC.

Understanding allowable expenses for tax purposes is crucial, as it can significantly impact your taxable profits. Accurate record-keeping for different tax years is also important to ensure you declare unpaid taxes correctly and realise losses effectively.

MTD ITSA for Landlords

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is coming in soon. From April 2026, landlords earning over £50,000 from property will have to comply, and those earning £30,000-£50,000 will follow in April 2027.

MTD ITSA means you’ll need to:

• Keep digital records of income and expenses

• Submit quarterly updates to HMRC using compatible software

• File an end-of-period statement and a final declaration

Getting your transactions categorised properly and records kept up-to-date is key. Investing in landlord-friendly, MTD-compatible software now could save you headaches later.

Quarterly updates don’t mean paying tax four times a year—you’ll still pay by the January deadline. But the new system is meant to cut down on mistakes and make the process a bit less painful.

Our Professional Support

At Cottons, we offer accountancy services designed for landlords and property owners. You can count on our expert team to provide specialised tax advice and support, handling the ins and outs of your financial management—no need to stress over the details.

Whether you’re managing things as an individual or running a limited company, we’ll shape our support around you. For sole traders, we’ll help keep your income and expenses organised, so tax time isn’t a headache.

Our engagement process kicks off with a close look at your property portfolio. From there, we’ll put together a plan that actually fits your goals—no cookie-cutter stuff.

We’ll work with your property management team to help ensure your financial moves back up your investment strategy. Regular chats keep you in the loop about how your portfolio’s doing and what’s changing in the rules.

You want accountants who actually get the property world and the headaches landlords deal with. With our specialist knowledge, you’ll get advice that’s current and genuinely useful—hopefully helping you keep more of your rental income and trim those tax bills.

Drop us a line if you’re curious about how our support could make property accounting a whole lot easier.