You earned £18,000 from rent.
You also paid £0 in mortgage interest, and no longer can claim any of it.
You can claim £3,600 as other rental expenses.
Your taxable rental income will be: £14,400.
£12,000 will be taxed at 20%: £2,400 in rental income tax.
£2,400 will be taxed at 40%: £960 in rental income tax.
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Your total rental income tax that you have to pay to HMRC depends on three things:
In your case you earned £18,000 from renting out a buy to let property, on top of £38,000 from other sources.
Your rental earnings are £18,000
You can claim £3,600 as rental expenses.
As a result, your taxable rental income will be: £14,400.
The first £12,000 will be taxed at 20%: £2,400 in rental income tax.
The next £2,400 will be taxed at 40%: £960 in rental income tax.
Anything can be claimed as long as it relates directly to renting or maintaining the property:
Three important things to keep in mind:
As long as you also live there, you can actually claim the first £7,500 as a flat tax relief.
It’s called the Rent-a-Room Scheme, and it’s one of the best tax reliefs landlords can get.
If you earn under £7,500 from rent, you don’t even need to declare it or submit a Self Assessment tax return.
Again, the only condition is that you also live at the property.
There are two situations:
1. If you also live at the property, you can claim the first £7,500 as a flat tax relief as part of the Rent a Room Scheme. If you earn less than that through Airbnb-ing your own home, you shouldn’t need to declare it.
2. If it’s a second property or a buy-to-let and you earn over £1,000 from rental income (including Airbnb), you have to declare it and pay tax on it.
First, if you’re renting out a buy-to-let, you can only claim mortgage interest – not the full mortgage payments.
Second, starting in 2020 you will get a tax credit worth 20% of your finance costs instead.
What does this mean for you?
The UK tax year for individuals starts April 6th and ends April 5th of the following year. From then, you have until January 31st to complete your online tax return for the previous tax year.
Figuring out how much tax you owe on your rental income is hard.
Correctly filing a Self Assessment tax return is even harder.
At TaxScouts, we do it for you online, fast, and for just £119, all in.
And we mean a few. After a couple of minutes of answering questions online we’ll have everything we need to start working on your tax return.
That’s right, you’ll be matched with a real accountant who is best suited to prepare your return. Plus, they’re on hand for questions whenever you need.
Once you’ve signed off your return, your TaxScouts accountant will file your return online with HMRC. That’s it! We told you it was simple.