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property letting and taxation

Hi Liz,

I have a question regarding property letting and taxation.

I have recently purchased a flat with a buy to let mortgatage that I have let through an agent. The rental income is £650 a month and the mortgage is £370.0 amonth. Am I correct in thinking that due to the low return less expenses and management charges that I do not need to declare the income for tax purposes ?

Many thanks.

Dear KS,
Sadly the situation may not be that simple. Rent is treated as income and taxed in line with your basic or higher rate tax bands. You can offset the mortgage interest payments, letting agency costs and maintenance expenses again the taxable income. However without knowing all the details of your total income I can only advise you to talk to an accountant. A short one-off interview won’t cost much but will set you on the right path so that you don’t end up with a bill for unpaid tax due.
Your total income from all sources is part of the income tax calculation. If you have earnings from a job and are paying income tax through a PAYE scheme you should declare any other income you on the appropriate pages of the self-assessment tax return – in your case the UK Property pages. If you are self-employed and already pay your income tax through self-assessment then in addition to the basic self-assessment form you should ask for and complete the property pages.
If you aren’t living in the UK you are a non-resident landlord and there is a special scheme for taxing your rental income whereby the letting agent deducts basic rate tax from the rent they collect from your tenants. The letting agent should also take off deductible expenses when working out how much tax to deduct. You can apply to HMRC (Her Majesty’s Revenue and Customs) for ‘approval to receive rents with no tax deducted’. Even if you get that approval and your rent is paid to you without tax being deducted it’s still liable to UK Tax and you must include it in your tax returns to HMRC.
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