01795 47 34 34
London Staffordshire
Sittingbourne Faversham
Property Search
Keyword Search
Family Homes  On Mobile

As a landlord you are liable to pay tax.  Not paying can result in a penalty.  There is tax to pay when you purchase a property, on any income earned and when you sell the property.

Stamp Duty

When you buy property, whether it is a flat, house, land or a lease, there is Stamp Duty Land Tax to pay.  Stamp Duty is due if the property is worth over £125,000.  This tax is charged as a percentage of the property’s value. 

Income Tax

Landlords must pay income tax on any profits from renting out property

·       Your profit is calculated as your total rental income minus any ‘allowable expenses’ 

·       Allowable expenses are those which are essential costs paid by landlords, such as mortgage interest, landlord insurance, accounting and legal fees, maintenance, agent fees and advertising the property for rent. 

If you rent out a furnished property, you can claim for the cost of ‘wear and tear’ or for renewing the furniture, but not both for the same property.  The wear and tear allowance is a deduction valued at 10% of the annual net rent. 

Allowable expenses do not include any work undertaken on the property that would increase its value, for example changing the kitchen or adding an extension.  These are known as capital expenses, and can often be offset from any capital gains tax payable when you sell the property on. 

Capital Gains Tax

When it comes to selling your rental property, you have to pay capital gains tax on any profit made from the sale.  Each tax year you are allocated a tax-free allowance but after this, basic rate taxpayers must pay capital gains tax at a rate of 18% and those falling into the higher tax bracket pay at 28%. 

There are methods to reduce your capital gains tax.  Similarly to income tax, you are able to offset some expenses that are incurred while selling the property, such as solicitors’ fees, estate agents fees, and stamp duty.  There are a number of circumstances that could result in deductions in capital gains tax, for example you can claim tax relief if you have lived in the property at any time. 

Landlords are normally required to complete a self assessment tax return in order to declare their rental income and capital gains or losses to the HMRC. 

Family Homes are letting agents with offices in Sittingbourne and Faversham.  We have been in business for over 25 years and are the leading and largest independent specialists in property lettings and management in the area. We are able to offer some advice to landlords regarding tax that might be liable to pay.  Please contact us for further information about our landlord services.