How To Pay Your Tax as a Landlord

Tax certainly isn’t the most exciting thing in the world. Nor does anyone like to pay for it. But unfortunately, everyone must. As they say, there are two certainties in life: death and taxes. 

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As a landlord, you need to pay tax on the earnings you make from renting, but it can be overwhelming not knowing where to start if you’re new to the world of buy to let and filing a tax return. 

Keep reading for all the information you need to stay on top of your taxes.

When will I pay tax on my earnings? 

When will I pay tax on my earnings? 

Landlords must pay tax on any earnings over £12,500. This can be from a professional income or investments.

However, if you are only receiving an income from renting and it is below the threshold of £12,500, you will not need to file a tax return or pay any tax.

What is the taxable rate for my earnings? 

Earnings between £12,500 and £50,000 have a taxable rate of 20%. This becomes 40% when your income rises to between £50,001 and £150,000. If you earn £150,000, you will pay 45%. 

However, your earnings as a landlord and your earnings in your job are not treated separately. Therefore, you will be taxed on them as a whole. 

Band

Earnings

Tax Rate

Personal allowance

up to £12,570

0%

Basic rate

£12,571 to £50,270

20%

Higher rate

£50,271 to £150,000

40%

Additional rate

over £150,000

45%

For example, if you earn £40,000 a year from your job and £12,000 a year from your rental property, you will be taxed on earnings above £50,000, and therefore 40%. However, it is important to note that you will only be taxed 40% on the £2,000 that is above the £50,000 threshold.

So, how do I actually go about paying my tax? 

The first thing you need to do when looking to sort out your tax is taking a self-assessment. This will allow you to file a tax return. 

In order to fill in your tax return, you’ll need information about the income you have received during the last tax year. You will also need information about any expenses you want to deduct. 

You will need to show: 

  • The dates you have let out your property 
  • A receipt for all the money you have spent
  • All the rent you have received 
  • Lease or letting contracts
  • Rent books 
  • Receipts 
  • Invoices 
  • Bank statements 
  • Mileage logs (for travelling to your property for business purposes) 
  • The cost of the vehicle used for property trips/ business and the CO2 emissions 
  • All the documents you received when you bought the property

You can often get reductions in your tax if you can prove you have paid for certain things regarding your rental property. These can include: 

Once you have filled in your tax return, a calculated bill will be sent to you, and you can pay your landlord tax. 

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