Income Tax

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Income Tax

The UK tax year runs from 6th April to the following 5th April. The deadline for filing the Income Tax return for the year is the following 31st October for returns filed by post, and the following 31st January for returns filed electronically. At Duke Taxation Services we file all personal tax returns electronically.

If you are renting out your property, it is important to realise that you must file a UK income tax return each year. Tax relief can be claimed on many of the costs of running your property, such as mortgage interest, letting agent’s fees, repair and maintenance and legal costs etc. However, income tax is usually due on the profit at rates starting at 20%. The tax treatment of the costs of finance (mortgage interest and mortgage application fees etc) has been changing. From 6th April 2020, no such costs are deductible from rental income. However, tax relief of up to 20% still applies on these costs by way of a reduction in the amount of tax due.

Managing your tax obligations and your relationship with the UK tax authorities is a very important part of making your property investment experience a happy, smooth and profitable one.

We tend to recommend that all investors enter into the Non-Resident Landlord Scheme. A successful application will result in HM Revenue & Customs confirming to your rental agent that they do not need to withhold tax from your income. This gives you a helpful cashflow benefit. However, some investors make the mistake of assuming that this means they have no tax to pay and no obligations to file, or that the rental agent files for tax on their behalf. None of these things are true! You still need to file a tax return and may still have to pay tax on the profit you make.

Not all investors are entitled to the Personal Allowance, which exempts the first tranche of income (GBP 12,500 for 2020/21) from tax. There is also a need to correctly complete the Residence pages, to declare any other sources of UK income and further issues can arise if you have lived in the UK recently, or are moving to the UK.