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Your free guide to Landlord Tax

As property experts, we know how important tax is as part of understanding the potential rewards from buy to let property. Read our handy guide.

The rental market is growing rapidly and, as new tenants continue to contact us every day, our agents need properties like yours to meet the demand.

Finding you the right tenant

Our team of marketing experts know exactly how to showcase your property, attracting the right tenants, in a time frame that suits you.

  • Gain exposure with websites such as Rightmove, Zoopla and PrimeLocation
  • Contact our own tenant applicants to reach your target market
  • Make use of our high street presence which attracts new enquiries everyday

And it doesn’t end there…

Our property management service is designed to make life easier for landlords like you.

As well as taking the time and care to find well-suited tenants, we offer…

  • legal documentation to protect your property
  • 24-hour repair support and access to fully- vetted contractors
  • Rent collection, statements and arrears management plus legal protection insurance

Let your property today

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Your information is being collected and processed by Countrywide for the purposes of providing the service and/or products you have requested. Personal data will be processed in accordance with the Data Protection Act 2018 and all other applicable data protection law and regulation, such as the General Data Protection Regulation. We may market products and services to you under the lawful basis of legitimate interests. Should you not wish to receive any unsolicited marketing from us you have the right to object to this processing by emailing privacy@countrywide.co.ukFull details of how we process your information can be found in our website Privacy Notice. A printed copy of our Privacy Notice is available on request. If you need to discuss how your information is being processed, please contact us at privacy@countrywide.co.uk.

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…to moving them in

As experts in the lettings business, we will make sure your new tenant is safely and legally settled in, to the satisfaction of all.

Our service can help with any of the following:

  • The offer process
    We can use our appraisal of your property and our market knowledge to get the yield you are looking for from your property

  • Referencing
    It’s key that you have the right tenants so we’ll make sure the vetting process is thorough and all referencing is complete

  • Contracts
    We’ll handle the paperwork and ensure such things as the tenancy agreement and inventory lists are completed and signed

  • Tenancy Deposit Scheme
    We can register the initial, tenant deposit to comply with legislation. We can collect the rental monies and release the keys once everything is in place...

From finding your tenant right through to the end of the letting process we can help you every step of the way.

Buying a property

  • Stamp Duty Chevron Down IconIcon set Chevron Down

    Stamp duty, or to give it its full name, stamp duty land tax (SDLT), is charged when you buy a property or piece of land – regardless of whether it’s residential or non-residential and whether or not you are a first-time buyer.

    Charges on stamp duty were temporarily changed in July 2020 and, mean those purchasing a main home under £500,000 that completes before 31 March 2021 will pay no SDLT– saving thousands of pounds.

    If you’re purchasing a second home to rent out, you would have previously been required to pay an additional 3% SDLT on top of the main rate bands. Due to the temporary reduction in place until 31 March 2021 for any purchase up to £500,000, you’ll just be required to pay the 3%. Above £500,000 and the main rates and the 3% additional rate still apply.

    Better still, if you’re purchasing a property for under £40,000, e.g. as a fixer-upper, there’s no stamp duty to pay at all.

    Work out how much stamp duty you’ll be paying on your property in just a few clicks with our stamp duty calculator.

Letting a property

  • Income Tax Chevron Down IconIcon set Chevron Down

    Once you’ve started renting your property out, you’ll need to start declaring any income you receive from lettings to HMRC by self-assessment.

    The rate of income tax you pay varies by how much you earn – you won’t pay any income tax if your total taxable income, including rental income, is less than the £12,500 tax-free Personal Allowance per year. If your taxable income is over £12,500 you’ll pay the following rates of income tax:

    • £12,500 - £50,000 = 20% of your income
    • £50,000 - £150,000 = 40% of your income
    • £150,000 >  = 45% of your income (and the Personal Allowance goes down by £1 for every £2 of income above the £100,000 limit)

    Landlords are entitled to a £1,000 tax-free property allowance (pre-expenses) – so if you make less than £1,000 a year from letting property, you don’t need to tell HMRC. If you’re employed as a landlord, i.e. if you file a self-assessment tax return and don’t run a limited company, you’re entitled to a £1,000 tax-free trading allowance.

    Landlords who make a gross profit of between £1,000 and £2,500 from lettings must make HMRC aware of this to pay tax. Landlords who make between £2,500 and £9,999 after expenses or over £10,000 before expenses will need to self-assess and may have to pay income tax.

  • National Insurance Chevron Down IconIcon set Chevron Down

    You will also be required to pay National Insurance contributions (NIC) on your rental profits. Class 2 NIC will apply if your annual rental profits are £6,475 or more and the following criteria apply to you:

    •       Your only job is being a landlord
    •       You rent out more than one property
    •       You’re buying new properties to rent out

    Class 4 NIC is also payable on rental profits that exceed £9,500 a year

    Class

    Rate for tax year 2020/21

    Class 2

    £3.05 per week

    Class 4

    9% on profits between £9,501 and £50,000

    2% on profits of over £50,000

     

    HMRC has created a comprehensive guide to income, which is available on their website. Please note: we recommend you speak to a trained tax professional, like an accountant or HMRC.

  • Finance costs Chevron Down IconIcon set Chevron Down

    Landlords of residential properties can get basic rate tax relief for the interest costs they incur in relation to the purchase of the rental property. This is given as a reduction of the tax due to the lower of:

    • The related interest costs in the year
    • The business profits from rentals
    • Total of all taxable income (after losses/reliefs) that exceed the personal tax-free allowance
  • Expenses Chevron Down IconIcon set Chevron Down

    To assist you with the up-keep of letting, HMRC allows landlords to claim for everyday expenses that running and maintaining properties may incur. These include:

    • Insurance, e.g. landlords insurance and buildings and contents insurance
    • Accountants Fees
    • Operational costs, e.g. transport, fuel and stationery
    • Ground rent and service charges
    • Bills paid while the property is not being let out
    • Testing, e.g. fixed wire, gas, legionella
    • General repairs, cleaning and gardening
    • Legal costs, e.g. cost of tenancy agreement or notices to vacate
    • Advertising Fees
    • Management Fees from letting agents
    • Administration Fees
    • Deposit Protection Scheme Fees

    As a landlord, you can claim tax relief for replacement household goods, including:

    • Free-standing furniture, e.g. beds and wardrobes
    • Furnishings, e.g. curtains, carpets and floor coverings
    • Household appliances, e.g. televisions, fridges and microwaves
    • Kitchenware, e.g. crockery and cutlery

    It’s important to remember that this relief only applies to replacement furniture and not furnishing a property before you let it.

    If you’re earning money as a landlord, you must let HMRC know within six months – this can be done by calling them on 0300 200 3310.

    The tax year runs from 6th April – 5th April each year. Landlords can file a paper-based self-assessment by post before 31st October or complete the return online by 31st January.

    If you fulfil the criteria to be registered, don’t leave it too late – you should register by 5th October at the latest.

  • Landlords with multiple properties Chevron Down IconIcon set Chevron Down

    It’s common for landlords to have more than one property. Where this applies, your tax is similar to running any other business. With regards to self-assessment, rent and expenses from similar properties are combined into one single figure.

    Similar properties may include the following, depending on your portfolio:

    • UK rentals – properties you’re letting out in the UK
    • Overseas rentals – properties you’re letting out abroad on long leases

Maximising your income

  • Marriage Allowance Chevron Down IconIcon set Chevron Down

    Married couples and those in civil partnerships are eligible for a tax allowance if one person is earning less than £12,500 and the other person pays income tax at the basic rate (if they earn between £12,500 and £50,000). Couples can receive the married tax allowance if they are living abroad or are receiving a pension. The marriage allowance can only be claimed by the person with the lowest income.

  • Setting up a partnership Chevron Down IconIcon set Chevron Down

    If you’re part of a couple and you both pay the basic rate of tax, you may consider setting up a business partnership to share responsibility for the bills, profits and losses your lettings make.

    The benefit of setting up a partnership is that each partner only pays tax on their share – meaning you can prevent one person from moving into the higher rate of income tax.

    If, for example, you earned £60,000 profit from renting and this was one person’s income, they would pay basic rate income tax (20%) on the first £37,500 and the higher rate of income tax (40%) on the profits over £37,500 – this would mean the person would incur a £16,500 tax bill.

    If the £60,000 was paid into a partnership and each partner had a 50% share, they would each receive £30,000 and qualify for the basic rate of income tax (20%) – meaning each person would pay 20% of £30,000 which is only £6,000 – a total tax saving of £4,500.

    If you’re thinking of setting up a partnership, you will need to choose a name for the business and nominate a partner to be responsible for sending the business’ tax returns – the nominate partner will also be required to register with HMRC. Both partners will also be required to send their self-assessment tax returns and pay the relevant rate of income tax.

  • Setting up a private limited company Chevron Down IconIcon set Chevron Down

    Setting up a private limited company may be beneficial if you’re expecting to earn over £150,000 and pay a higher rate of income tax (45%) from your lettings.

    Private limited companies are separate from those who run them – this includes having separate finances.

    What’s advantageous about setting up a private limited company is you can pay yourself and your partner a salary within the basic rate of income tax and, if eligible, have your partner claim marriage allowance. You can then split the rest of the profits between the shareholders as dividends.

    It is also possible to buy, sell and transfer shares, so you could include members of your family or friends in the company – this is a way of mitigating paying income tax at higher rates.

    Please note: higher rates of SDLT apply to a property purchased via a company and if the property is valued at more than £500,000, an annual tax charge is payable based on the property value.

    Before setting up a private limited company, you should seek professional advice. You’ll need to choose a company name, registered address, appoint directors and a secretary and detail the terms for running the company in a memorandum and articles of association.

     

* Based on tenants registering across Countrywide Residential Lettings in June compared to the previous month.