Taxation on Letting Income

UK Resident landlords

If you are a resident landlord in the UK, your net taxable profit from your rental business represents income received without tax deduction at source. This will need to be added to your other taxable income in order to work out your overall tax liability for a particular tax year. The normal method of reporting your taxable income to the inland revenue and calculating your tax liability is via a self assessment tax return.


Non Resident UK landlords

The Non Resident landlords (NRL) scheme is for taxing the UK rental income of person whose usual place of abode is outside the UK. Unless a landlord can provide an exemption certificate from the Inland Revenue, we are obliged by law to deduct basic rate tax (currently 23%) from rents received and account to the Inland Revenue on a quarterly basis. Landlords should also note that a maximum penalty for non compliance with these regulations is a fine up to £5000 or six month imprisonment.



Reducing  Liability

As a landlord the inland revenue will view you in the same way as a business, meaning that costs and expenses incurred may be off set against the rental income, these expenses can substantially reduce or eliminate your tax liability. The letting income on which you are subject to tax is gross income less certain expenses usaully incurred, which usually include the following:-

  • Loan interest (subject to conditions)
  • Rent, rates and ground rent
  • Cost of providing services included in the rent
  • Professional fess, agents, accountancy and legal fees
  • Cost of repairs
  • Maintenance charges
  • Water rates
  • 10% wear and tear allowance (for furnished properties) 653E-5AE5-XK89-7KKW-WX5S