Running a property business
- being a landlord is your main job
- you rent out more than one property
- you’re buying new properties to rent out
You don’t pay National Insurance on your rental income if you’re not running a property business – even if you do work like arranging repairs, advertising for tenants and arranging tenancy agreements.
Property you personally own
- £2,500 to £9,999 after allowable expenses
- £10,000 or more before allowable expenses
Property owned by a company
Count the rental income the same way as any other business income.
Costs you can claim to reduce tax
- residential properties
- furnished holiday lettings
- commercial properties
You or your company must pay tax on the profit you make from renting out the property, after deductions for ‘allowable expenses’.
- letting agents’ fees
- legal fees for lets of a year or less, or for renewing a lease for less than 50 years
- accountants’ fees
- buildings and contents insurance
- interest on property loans
- maintenance and repairs to the property (but not improvements)
- utility bills, like gas, water and electricity
- rent, ground rent, service charges
- Council Tax
- services you pay for, like cleaning or gardening
- other direct costs of letting the property, like phone calls, stationery and advertising
Allowable expenses don’t include ‘capital expenditure’ – like buying a property or renovating it beyond repairs for wear and tear.
Furnished residential lettings
You can claim 10% of the net rent as a ‘wear and tear allowance’ for furniture and equipment you provide with a furnished residential letting. Net rent is the rent received, less any costs you pay that a tenant would usually pay, eg Council Tax.
Furnished holiday lettings
- plant and machinery capital allowances on furniture, furnishings, etc in the let property, as well as on equipment used outside the property (like vans and tools)
- Capital Gains Tax reliefs – Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans to traders
- the property is offered to let for at least 210 days a year
- it’s let for more than 105 days a year
- no single let is more than 31 days
- you charge the going rate for similar properties in the area (‘market value’)
If you own the property personally, your profits count as earnings for pension purposes.
- capital allowances
- furnished holiday lettings
You can claim plant and machinery capital allowances on some items if you rent out a commercial property – like a shop, garage or lock-up.
1. Landlord responsibilities
- your rented properties safe and free from health hazards
- making sure all gas and electrical equipment you supply is safely installed and maintained
- following fire safety regulations – download ‘Housing: Fire safety’ (PDF, 1.6MB)
- providing an Energy Performance Certificate for the property
- protecting your tenant’s deposit in a government-approved scheme
Health and safety inspections
The Housing Health and Safety Rating System (HHSRS) is used by your council to make sure that properties in its area are safe for the people who live there. This involves inspecting your property for possible hazards – for example, uneven stairs leading to increased risk of falls.
- your tenants have asked for an inspection
- the council has done a survey of local properties and thinks your property might be hazardous
HHSRS hazard ratings
Inspectors look at 29 health and safety areas and score each hazard they find as category 1 or 2, according to its seriousness.
ou must take action on enforcement notices from your council. You also have the right to appeal enforcement notices.
- issue an improvement notice
- fix the hazard themselves and bill you for the cost
- stop you or anyone else from using part or all of the property
- Income Tax on your rental income, minus your day-to-day running expenses
- Class 2 National Insurance if the work you do renting property counts as running a business
If you have a mortgage on the property you want to rent out, you must get permission from your mortgage lender.
There are special rules for changing rents and terms for regulated tenancies (usually private tenancies starting before 15 January 1989).