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Do landlords have it all in 2023?

  • 3 min read
  • 29 Jun 2022
2 landlords discussing

Landlords have it all, right? Guaranteed income, often multiple properties around the country. But how easy is it really to launch your own property business? Here are a few important considerations to help you along the way.

1. Costs

It’s no surprise that becoming a landlord is not a cheap feat. To start with, you need to have a property to let out. Presuming that you have this at the ready (obviously, it’s pretty crucial), the next thing to consider is that there are different types of landlords. And each with different tax responsibilities.

What are some examples of different types of landlords?

Live-in-landlords, for instance, can earn up to £7,500 in rental income a year tax-free. If you live outside of London, this allowance can go a long way. It’s known as the Rent-a-Room Scheme.

Alternatively, if you own property that you exclusively let out, the tax-free allowance is lower. 

It’s called the Property Income Allowance and it allows up to £1,000 of rental income tax-free per year. 

2. Management

Being a landlord is not a background role. Something to consider whether you want to manage the property yourself or have it looked after by letting agents. If you want to look after it yourself, bear in mind that you’ll need to be on call, or have a team of people who are on call for anything that goes wrong. 

What about a lettings agent?

If you choose the lettings agent route, you should put 15-20% of the monthly rent aside to cover the agent fees. Otherwise, costs to be prepared for are those for general maintenance, refurbishment and – worst case scenario – void periods when you have no tenants occupying the space.

3. Airbnb hosting

Somewhere between committing to being a landlord and dabbling part-time sits the Airbnb host. Airbnb enables you to let out your house or property for shorter term stays which in some areas of the UK is limited to 90 days

Are there any tax implications?

Yep. There are, as ever, tax implications attached to being an Airbnb host. 

What you owe depends on how you use the Airbnb platform. If you rent a room in your house, you’ll fall under the Rent-a-Room Scheme where your tax-free earnings are capped at £7,500 a year. 

Listing property that isn’t your home and that you use purely for rental income – or if you rent out your whole home – means that you’ll be taxed like any business owner and be liable to pay income tax. 

On rental income that’s more than £90,000 per year, you’ll need to register for VAT.  

4. Gifted property

So, you’ve been gifted a property. Things couldn’t be better! But did you know that you’re liable to pay tax on property even when it’s been gifted to you? 😭

Unless it was already your home or you gave it to your spouse, the person who gifted it to you will most likely pay Capital Gains Tax (CGT) and you will pay Stamp Duty

Do I have to pay Inheritance Tax?

Maybe. If the person who gifted you the property passes away within seven years of gifting it to you, you’ll have to pay Inheritance Tax, unless the entire estate is anything less than £325,000 (or £500,000 if it’s your main home).

5. Allowances and expenses

When it comes to being a landlord, you can claim or expense anything (within reason) that directly relates to your property maintenance. Property maintenance includes letting agent fees, accounting fees, rent, gas and electricity bills. 

Costs for repair can also be claimed, although costs for home improvements cannot.

Take a look at more allowable expenses that you might be able to claim as a landlord.

Tell me more…

If you want to know more about becoming a landlord and what that would require in terms of taxes, or you’re already a landlord and need some tax advice, get in touch with our accountants for a one-off, tax advice consultation. Learn more

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