Tax tips for landlords
Whether you’re an experienced or a new landlord, it can be easy to forget your tax liabilities. Here are some tax tips for landlords
Whether you’re an experienced commercial landlord, or an accidental landlord having inherited a property, it can be easy to forget your tax liabilities.
Her Majesty’s Revenue & Customs [HMRC] is warning landlords who have failed to declare their rental incomes to assess what they owe to the exchequer and pay up – or face stinging fines.
HMRC is concerned about the issue because they believe it is costing the Government millions of pounds a year. They estimate that one million buy to let landlords are short-changing the tax office to the tune of £550 million a year.
Here are some tax tips for landlords:
Declare your income or face the consequences
Many landlords are not aware they need to declare any income generated to HMRC. If the rental income is barely covering a mortgage on a property, you probably don’t see yourself as making an income with earnings to declare.
Yet landlords should take the HMRC’s latest crackdown seriously as they have a range of resources to identify incomes from rented properties. The HMRC can check tenant deposit registers, track data from letting agents and local authorities, while it also has data on landlords who receive tenants’ housing benefits payments directly.
Volunteer undeclared earnings
However, there is an opportunity to make amends for those that feel they may have fallen foul of the regulations. HMRC has launched a ‘Let Property Campaign,’ which lets landlords off the higher penalties being introduced if they have filed inaccurate tax returns.
For Landlords who have undeclared earnings or have filed inaccurate returns, if they proactively engage with the HMRC then they can escape penalties of up to 100% and potential prosecution. However, these landlords will still face a penalty of up to 20%, plus the tax and interest.
If you are a landlord and are concerned about your tax bill, then it is crucial to be proactive and calculate what you owe the tax office. It may be that you are faced with a large bill now, but it will only be larger in future. Keeping track of your earnings can be difficult, but there are apps available for your smartphone that will help you calculate them each year.
For instance, DL4B’s Mobile Landlord app has a reminder system which the user can set for tax return due date. Plus, it also includes a yield calculator that can help you complete your tax return by logging your expenses and income by tax year.
Tax can slip down your list of priorities. But neglecting it could leave you with a very large bill to pay and even worse, you could be prosecuted if you ignore your tax obligations.
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