'Tis the Tax Season: Essential Tips for Landlords Preparing for Self-Assessment Tax Returns
As 31st January 2024, approaches, landlords across the UK are gearing up for the annual ritual of submitting their self-assessment tax returns. This process can be complex and, at times, overwhelming. However, with the right preparation and understanding, you can navigate this process with ease and accuracy. Read our tips for being prepared...
In a world that moves at a relentless pace, where distractions abound and the demands on our time and attention are constant, leaving things until the last minute can seem almost an inherent part of our nature. Whether it’s preparing for an important meeting, tackling a significant project, or even submitting a tax return, many of us find ourselves deferring action until the urgency becomes too pressing to ignore.
This pattern of behaviour is not just about the thrill of working against a ticking clock or an underestimation of the time a task will take, it is the human trait of procrastination!
Understanding this tendency is crucial, not just for self-awareness but also for developing strategies to manage our tasks more effectively and reduce the stress and anxiety that accompany last-minute rushes. As we delve into the topic of preparing for self-assessment tax returns, it’s important to recognise this human inclination to procrastinate. Acknowledging it is the first step towards countering it, paving the way for a more organised, less stressful approach to meeting important deadlines, such as the upcoming tax submission date.
Note to self - New Years Resolution - Stop procrastinating!
Anyway, back to the task of submitting our self assessment return when letting property. Here are some tips to help ease the stress:
Understand What You Need to Declare
First and foremost, it’s crucial to understand exactly what income needs to be declared. As a landlord, this includes all rental income received from your property or properties. This income is not just the monthly rent payments; it also encompasses any additional fees paid by tenants, such as for cleaning, repairs, or service charges.
Keep Impeccable Records
Good record-keeping is the cornerstone of a hassle-free tax return process. Ensure that you have detailed records of all rental income, as well as receipts and invoices for any allowable expenses. The HMRC can request to see your records up to six years after the submission, so it’s important to keep everything organised and accessible.
Be Aware of Allowable Expenses
Understanding what expenses can be deducted from your rental income can significantly reduce your tax bill. Common allowable expenses include:
- General maintenance and repairs to the property (but not improvements)
- Utility bills (if paid by you and not the tenant)
- Insurance for the property
- Agent fees and property management costs
- Interest on property loans (but note that this relief is now capped)
- Council tax and ground rent (if applicable)
Consider Capital Gains Tax
If you’ve sold a property, you might need to pay Capital Gains Tax. Keep records of the sale, including the purchase and sale prices, as well as expenses related to the sale, such as solicitor and estate agent fees.
Remember, you must report and pay any Capital Gains Tax on most sales of UK property within 60 days and NOT wait to declare it on your self assessment return.
Use HMRC-Approved Software
Filing your tax return online is straightforward, especially when using HMRC-approved software. This software can help you calculate your tax, submit your return directly, and provide you with an immediate acknowledgment of receipt from HMRC.
Don’t Forget the Deadlines
The deadline for submitting your online self-assessment tax return is January 31, 2024. However, leaving it to the last minute is risky. Aim to start compiling your documents well in advance to avoid the stress of a last-minute rush and the potential for errors.
Seek Professional Advice if Needed
If you’re unsure about any aspect of your tax return or if your circumstances are particularly complex, consider seeking advice from a tax professional. They can provide tailored advice and ensure that your return is complete and accurate.
Plan for Your Tax Payment
Remember, submitting your return is only one part of the process – you also need to pay any tax owed by 31st January. Ensure you have funds set aside for this payment to avoid interest and penalties.
Stay Informed on Tax Changes
Tax laws and reliefs can change, so it’s important to stay informed about any new rules or regulations that might affect your tax return. Regularly check the HMRC website or consult with a tax professional for updates.
Preparing your self-assessment tax return as a landlord need not be a daunting task. With thorough preparation, understanding of allowable expenses, and adherence to deadlines, you can ensure a smooth and successful submission. Remember, timely and accurate completion not only keeps you compliant with HMRC regulations but also provides peace of mind as you continue to manage your rental properties.
Every individuals tax position is different so for personalised assistance or more information, consider contacting a professional tax advisor or accountant who specialise in property taxation.
