Rental Income

You must pay tax on any profit you make from renting out property.

How much you pay depends on:

• how much profit you make
• your personal circumstances

Your profit is the amount left once you’ve added together your rental income and taken away the expenses or allowances that you can claim.

You must register with HMRC if you have taxable profits from the property you rent out. If you’ve not told HMRC about your property rental previously, you need to do so by 5 October following the tax year you had taxable rental profits. You could be charged a penalty for failing to inform HMRC.

Paying tax and National Insurance

When you rent out property you may have to pay tax on the profit after taking into consideration all allowable expenses

Some examples of allowable expenses are:

• general maintenance and repair costs.
• water rates, council tax and gas and electricity bills (if paid by you as the landlord)
• rents, ground rents and service charges
• direct costs such as phone calls, stationery and advertising for new tenants
• insurance (landlords' policies for buildings, contents, etc)
• cost of services, e.g. cleaners, gardeners, ground rent.
• agency and property management fees.

The expense should be incurred wholly and exclusively as a result of renting out your property.

Running a property business

You have to pay Class 2 National Insurance if your profits are £6,475 a year or more and what you do counts as running a business,
for example if all the following apply:

• being a landlord is your main job
• you rent out more than one property
• you’re buying new properties to rent out

How to calculate your taxable rental profits

There are different rules to follow if you’re:

• renting a room in your home
• letting a property as a furnished holiday letting
• renting out foreign property
• letting a property in the UK while you live abroad

Rates of tax

The rate of tax you pay depends on your total income for the year including any income from employment, self-employment or pension