HOW YOU PAY TAX ON RENTAL INCOME ON RESIDENTIAL PROPERTY IN THE UK
You can receive your rent either:
- in full and pay tax through your annual self-assessment - if HMRC approves you to do this (see below)
- with tax already deducted by your letting agent or your tenant at sourceIf you want to pay tax on your rental income through annual self-assessment and not by deduction at source then you are required to complete a Self-Assessment form annually and also complete form NRL1 and return it to the HMRC. If they then give approval to us, as your managing agent, to pay rent gross of Tax, for all future years you will need to declare your rental income in your Self- Assessment tax return. HMRC will not approve your application if your taxes aren’t up to date, for example if you are late with your tax returns or payments. Each person owning the property or properties is required to apply as an individual.A non-resident landlord approval number is granted to each UK property owner who is non resident or a foreign national. Only one number is issued per person and is applied across all properties for calculating UK income from rental properties. This number is for life and there is no requirement to apply for additional properties.To assist you can either:Arrange this yourself – Go to the HMRC website and complete an application online.
You will need to have all your details available, including BTL property addresses and your personal details. You must notify us of progress of the application as we are instructed by HMRC to withhold 20% of your rent until the approval is granted, to enable this amount to be offset against future income tax liability if approval is not granted.
Ask Homes or Houses to refer you to an accountant, who will complete the registration for you, they can also then complete your annual self-assessment for you and we will work them to provide all financial details pertaining to your property to enable them to do so. The fee for this service is:
- £60 (inclusive of VAT) for registration per person.
- £99 for annual self-assessment completion and submission per person.The accountant will ensure the application is swift and followed up to ensure approval. They will pass the approval number to you and to us with your approval and will be in touch when your first or next self-assessment is due. You will deal directly with the accountant.
As A Property Investor How Does SDLT Affect Me?
From April 1 2016, anyone purchasing an additional/second property will have to pay an extra 3 per cent stamp duty. The changes apply to companies and individuals no matter how many properties you are purchasing.
As an example from April, second homes owners or landlords will have to pay 3 per cent for the first £125,000 (prior to April 1st the rate for up to £125,000 was 0 per cent and 5 per cent on the amount between £125,001 and £250,000 where it was previously 2%.
Currently freehold property purchases involving transactions less than £40,000 don’t need to pay SDLT or tell HMRC about freehold land and property transactions with a total chargeable consideration of less than £40,000. But the total chargeable consideration includes any linked transactions so caution is advised.
HMRC - Capital Gains Tax - FAQ's
Click Here to download the frequently asked question's PDF regarding Capital Gains Tax produced by the HMRC.
HMRC - Stamp Duty Land Tax - FAQ's
Click Here to download the shortened version of the frequently asked question's PDF regarding Stamp Duty Tax produced by the HMRC.