A little advice needed for new landlord

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    A little advice needed for new landlord


    I've searched the net far and wide and most info differs. Here is my situation......

    I've owned a property since 2006. Now I've decided to rent it out. I've got a new residential property and second home.

    So, I've done the following:

    Sorted my self out a BTL mortgage. Got my solicitor doing the remortgage. Found a tenant. Got a move date planned and a Tenancy agreement sorted. I've got landlord insurance which includes buildings and contacts. I've sorted the energy certificate. I've taken a deposit and put it in the correct DPS schemes. I've pretty much got it all sorted.

    My question is Tax - I understand I don't need to worry about sorted the tax returns until next year. However, I've never done a return in my life. I've looked about the net and HMRC state I must set up on one property rental portfolio as a 'business'. Really??? A business? It's hardly a business..... I'm renting because due to personal circumstances, I can not tell it.

    Any thoughts on this? If I don't need to set this up a 'business', can I still do a 'self tax return' when the time comes.. I'm only looking at making £3800 met profit per year so its hardly big business figures.

    I assume I need to consider reserving 20% of my monthly profit as tax for when that tax bill comes. Also, I have a full time employment. Being a landlord, will that cock up my employment tax.

    Cheers guys

    It is a business - with all the risks that a business involves.

    If it is not a limited company then how you keep your accounts is up to you, but you will have to fill out self-assessment tax forms. I have a vague memory that for amounts under £X you can make arrangements with HMRC to have it taken from yo via your PAYE tax code - but don't quote me on that.

    Phone HMRC. They are usually helpful and may run a free one-day course on the basics.


      Just for extra info, there is a good newbie LL guide here:


      which is very informative and within it is a link to the HMRC info you need.

      A single let property is very easy to manage - I've done my own tax returns since 2000. Basically the secret is to keep good records and receipts. A simple spreadsheet will help, but I just chuck everything in a file and sort it out when I do my Self assessment form. You need to make sure if you want to do a paper return, that you request the pages specifically for "income from property", but you can also do in online - register early as it take a while to activate your account. All they ask for is total rent received, total allowable expenses and the resulting figure is the profit, which you will be taxed on (if relevant). You obviously also need to declare this additional income if you claim any benefits, tax credits etc. It is possible HMRC may ask to audit your return and see proof of the income and expenditure.

      It might also make it more managable, if you open a separate bank account for receiving rent and paying out your letting expenses etc, as its then all on one statement and easy to keep tabs on.


        Cheers for the response, I just thought its a little extreme classing myself as a business with ONE property. I guess if this works out, I could expand.

        I am very keen to keep my PAYE separate to my rental property and very concerned tax codes are going to get cocked up. I'm certain I can get away with the 'short tax return' version as my profits are less that £15k (or what ever the limit was).

        I've got a separate bank account sorted so tracking the in's and out's easier.

        I've pretty much mastered the expenses I can claim on my tax form which isn't many (insurance, legal fees, bills etc etc). However, my BTL mortgage is £317.... My rental is £700 a month. Profit £383 per month (not including VAT deductions). On the form, I assume I declare all profit, minus the mortgage over the year. Do u get a tax deduction on the interest element of the mortgage?

        I assume my form would look like this:
        Profit between April to April: £8400
        Mortgage repayments: £4596

        Net profit: £3804...... I assume this is the figure my 20% tax is deducted from.

        Just hope I'm on the right line of thought


          They can't be totally separate as you only have one tax account. Your total income for the year is your salary and your rental profit added together.

          You can not claim the mortgage repayments, only the mortgage interest. This is because you will eventually profit from the 'capital' part of the payment by selling it, so it's not an expense.


            Only mortgage INTEREST is an allowable expense, so unless its an interest only mortgage, you have to ignore the repayment portion and only deduct the interest. This may significantly change your estimations above!

            Check out the HMRC link within the link I posted above, for the allowable expenses you can deduct.


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