Rental income comes with tax obligations. Landlords must declare income to HMRC and pay the correct tax on profits.
What Counts as Rental Income?
- Rent payments
- Non-refundable deposits
- Charges for additional services (if permitted under the Tenant Fees Act)
Allowable Expenses
Landlords can deduct:
- Letting agent fees
- Property repairs and maintenance
- Insurance premiums
- Council tax and utilities (if landlord pays)
- Accountancy fees
Mortgage Interest
Since 2020, mortgage interest is no longer deductible. Instead, landlords receive a basic rate tax credit.
Reporting to HMRC
- Landlords must file a Self Assessment tax return annually.
- Digital record-keeping will become mandatory under Making Tax Digital.
Penalties
Failure to declare income can result in fines, interest charges, and investigations.
Conclusion
Understanding tax responsibilities avoids HMRC penalties and ensures profitability.
Download our free landlord checklist to track your financial obligations.