Landlord guide to completing tax returns

Overview
If you receive untaxed income exceeding £1,000 during a tax year, you are required to submit a Self-Assessment Tax Return to HMRC.

• Registration: You should have registered with HMRC for Self Assessment by October 5th, 2023. If not, ensure you do so before January 31st, 2024, to avoid penalties.
• Rental Income: Rental income is taxable. The deadline for submitting your online Self Assessment tax return is midnight on January 31st, 2024. Missing this deadline can result in an initial £100 penalty, with potential late payment penalties and interest reaching up to £1,020 on a £5,000 tax bill by month six.
• Tax Payment: The tax due for the 2022/23 tax year is also payable by January 31st, 2024. If this is your first year and your tax bill exceeds £1,000, you will need to make a "payment on account" of 50% towards the next year’s tax, with the remaining balance due on July 31st, 2024.

Step 1: Prepare Income and Expenditure
Start by gathering all records of income and expenditure for the tax year (April 6th to April 5th the following year). This can be downloaded or printed from your online Propertycloud account. 

• Income Documentation: Collect detailed breakdowns of your rental income from monthly statements or an annual report. Your property management agent can provide an annual rental statement if needed.
• Cash Accounting: For landlords with rental income below £150,000, the return is based on "cash accounting," meaning only payments received and made during the tax year should be included. 

Example: If a tenant pays £1,000 monthly rent but misses a payment during the tax year and pays it in May 2023, only the £10,000 received during the tax year should be reported.

Step 2: Understand Allowable Expenses
Break down your annual expenses into the following categories:

Insurance Costs: Includes buildings, contents, and rent insurance.
Ground Rent: Applicable if the property is leasehold.
Council Tax: Paid when the property is empty.
Utility Bills: Paid during vacancies.
Repairs and Maintenance: Necessary repairs are fully deductible, but be cautious with upgrades, as they may be classified as capital expenses.
Legal and Agency Fees: Any fees related to the rental property.
Service Charges: Factoring or service charges for the property.
Wages: If applicable, wages related to property rental (note: your labor is not deductible).
Travel Costs: Personal travel to the property can be claimed, typically at 45p per mile.

For more detailed guidance on allowable expenses, refer to HMRC’s Property Income Manual: HMRC Property Income Manual.

Step 3: Mortgage Finance Costs
You cannot directly offset mortgage interest costs, but you can claim a tax credit of 20% on the interest portion. For example, if your monthly mortgage interest is £350, you can claim £70 per month as a tax credit, totaling £840 annually. Review your mortgage statement to identify the interest portion.

Step 4: Repairs vs. Improvements
Repairs are allowable expenses, but improvements are not. Capital expenses, like adding an extension, are offset against capital gains upon selling the property. Replacing items with like-for-like products (e.g., a broken washing machine or boiler) is typically deductible, while upgrades (e.g., replacing laminate with marble countertops) are not.

Step 5: Submitting Your Tax Return
Government Gateway: Ensure you have your Government Gateway ID and password to access your Personal Tax Account (PTA).
Submission: Log in, select ‘Self Assessment,’ then click ‘Complete your Tax Return’ and follow the instructions.
Help: If you need assistance, contact the HMRC Helpline at 0300 200 3310, but be prepared for potentially long hold times.

Additional Tips
Record Keeping: Maintain organized records for at least five years.
Software: Consider using tax return software to simplify the process.
Professional Advice: Seek professional tax advice if you are unsure about any aspect.
Timely Filing: Always file your tax return on time to avoid penalties.

Accountants can typically produce and submit your tax returns starting at around £300 plus VAT.