Welcome to self assessment landlord self assessment tax return return for landlords! In this blog post, we will teach you step-by-step how to file your self assessment tax return for 2020. Keep reading for more information on what is a self assessment tax return and the importance of filing one.
What is a Self Assessment Tax Return For Landlords?
A self assessment tax return for landlords is a tax return that you need to file independently of your personal income tax return. Essentially, it is a tax return that you file on behalf of your rental property (i.e. on behalf of an ‘individual taxpayer’ in relation to Section 44 income). You may also want to review our blog post on how to file your personal income tax return for extra information.
The best thing about a self assessment tax return for landlords is that it is incredibly easy to file. In fact, you can file it online using the UK's Self Assessment Tax Return for Landlords form, found on the government's website. You will not have to visit a tax office or a physical accounting office to file your return. Filing online is much more convenient, and you can do it at any time.
You can expect to receive your filing results within 8 weeks. However, this can vary greatly from person to person. Some individuals have reported receiving their results within a few days, while others have had to wait up to a year. You should receive an email notifying you of your filing results, so keep an eye out for any correspondence from the Inland Revenue.
The key logistical item to note is that you will need to file an Annual Summary Return for Section 44 (i.e. rental property) in addition to your self assessment tax return. This is because the Annual Summary Return is used to determine your rental property's annual deductible expenses. To determine these expenses, the Inland Revenue will:
- Subtract your rental payments (i.e. mortgage or rent payments)
- Add any court fees, legal fees, or stamp duties that you paid relating to the property
- Add any depreciation expense that you claimed on your tax return
- Add any repairs or improvements to the property that you made (i.e. maintenance payments)
- Add any amounts you paid for property insurance
- Add any fees relating to your rental property that you paid (e.g. property management company fees)
- Add the total of the expenses listed above
- Subtract this total from your rental income (i.e. the income from your property minus any expenses you claim on your tax return)
- Deduct the resulting figure from your gross rental income (i.e. the total amount you made from your property minus payments you made for things such as furniture or appliances)
- Reduce your net taxable income by the amount of any personal exemptions you have
- Calculate your total tax liability
- Pay the resulting amount
Why Is Filing A Self Assessment Tax Return For Landlords Important?
The Inland Revenue states that filing a self assessment tax return for a rental property is important because it provides:
- A record of your income and expenses relating to the property
- A way of claiming any losses from the property on your tax return
- An opportunity to identify areas where you can improve your tax position
- The chance of receiving a tax refund if you qualify
- The ability to claim tax relief on items such as mortgage interest and rented property expenses
- The ability to access an accountant via the online service, Just Submit a Form
In addition to these advantages, you should also know that you are legally required to file a self assessment tax return for a rental property. However, you are not required to pay any tax you might earn.
How Do I File My Self Assessment Tax Return For Landlords?
To file your self assessment tax return for landlords, you will need to login to the UK's Self Assessment Tax Return for Landlords form. You will then be presented with the option to either enter your details manually or to use a filing tool to do the work for you. In either case, after entering your details, you will be taken to the next step of the form, where you will be able to upload some of the paperwork which supports your tax return. You can find the forms required for this particular return here, and should have all of the necessary documents to file this return within the next 7 days.
What Do I Need To File My Self Assessment Tax Return?
For a self assessment tax return for landlords, you will need to file the following documents:
- An income statement – List all of the income you received relating to the property (i.e. rents and sales), as well as any gains you made from buying and selling investments
- A balance sheet – List all of the assets you own (i.e. the property along with any furnishings or equipment within the property)
- An itemized list of all of the expenses you paid relating to the property
- A statement confirming that all of the income and expenses you claim are legitimate and within the scope of Section 44
- A copy of your tenancy agreement if you are a tenant
- Receipts for any furniture or appliances you were charged for (i.e. rental purchases), as well as any maintenance and repairs done to the property
- Your passport or ID (in case you need to prove you are an individual taxpayer)
- A detailed explanation of all of the figures used to create your tax return
If you do not have all of the paperwork within the next 7 days, you will need to request an extension from the Inland Revenue. You can request this extension on their website or via email. The Inland Revenue will notify you when your paperwork is ready for collection. In the meantime, you can continue to file your return, but you will have to do it manually.
Once you have filed your return and paid any tax that you owed, you can request a refund via the online service, Taxback, or by writing a letter to the Inland Revenue. You will then need to wait up to 6 weeks for your refund, as they have to verify your return and apply any credits you are due.
What If I Am Concerned About My Tax Position?
If you are eligible for either a capital gains or losses scheme (discussed below), you can use this to your advantage when filing your self assessment tax return for landlords. Essentially, you can offset the amount of any capital gains you made against your rental losses for the year. For example, if you bought a property for $500,000 and sold it for $600,000 (netting $100,000), you would only need to declare the $100,000 gain on your tax return. In addition, if you are in the 31% tax band, you will be able to claim a $31,000 tax rebate on your 2020 self assessment tax return for landlords. This is equal to 3% of your annual rental income, as long as you meet the eligibility requirements.