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Time is running out for landlords to file their self-assessment tax returns for the 2022-23 tax year.  

The deadline is midnight on Wednesday 31 January, and if you don’t file on time, you’ll be hit by an automatic £100 fine. 

This means it’s best to file with plenty of time to spare. Here, we share our top tips on submitting your tax return.

1. Find out if you need to file a return

This depends on how much money you brought in from buy-to-let between 6 April 2022 and 5 April 2023.

You’re entitled to receive £1,000 in rental income each year without paying tax on it.

This is called your property allowance, and it applies across your portfolio as a whole, not per property. 

If you received between £1,000 and £2,500 in rental income, you’ll need to contact HMRC to check if you’ll need to complete a return. 

If you received more than £2,500, you’ll need to register for self-assessment and submit a tax return.  

2. Work out your taxable income

If you’re an individual landlord (your properties are owned in your name, rather than via a company), your buy-to-let profits will be taxed at the same rates as employment income. 

The income tax bands for the 2022-23 tax year were as follows:

  • Tax-free: £0 to £12,570 – 0%
  • Basic rate: £12,571 to £50,270 – 20%
  • Higher-rate: £50,271 to £150,000  40%
  • Additional rate: £150,001-plus – 45%

Rates and bands differ in Scotland

How to calculate your bill

When calculating your tax bill, you’ll need to add your rental profits to other income you earned during the tax year.

For example, if you earn £45,000 in your day job, you’ll pay tax on the money earned above £12,570 at the basic rate of 20%.

If you then add £15,000 in rental income (making a total of £60,000), this would push you into the next tax bracket.

This means you’d pay 20% on your income between £12,571 and £50,270, then 40% on the remaining £9,730.

3. Deduct your expenses

When filing your return, you’re allowed to deduct expenses you’ve ‘wholly and exclusively’ incurred in the process of letting properties.

Commonly, this includes outgoings such as letting agent fees, landlord insurance premiums and accountancy.

Maintenance and repair costs can also be deducted, as can the cost of replacing furniture and white goods in furnished properties – though replacements need to be like-for-like. 

Utility bills and council tax payments can only be deducted if the tenancy agreement specifies that you are responsible for paying the bills, not the tenant. 

4. Keep track of small costs

Over the course of the year, you’re likely to have incurred lots of minor costs, some of which you’ll have forgotten about entirely.

The good news is that if you have kept records, minor outgoings such as the cost of phone calls to tenants and travelling to rented properties can be deducted.

One word of caution. As well as having receipts, you’ll need to be able to evidence these costs were incurred exclusively for business use.

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5. Calculate your mortgage interest tax relief

Mortgage interest tax relief is probably the last thing landlords want to hear about, given the controversial changes to the system that came into force a few years ago.

But a quick reminder: when filing your tax return, you can offset a flat credit of 20% of the amount you’ve paid out in mortgage interest.

For more information, see our full guide on mortgage interest tax relief.

6. Check if you’ll need to pay National Insurance contributions

If you made a profit from letting property in 2022-23, you may need to pay National Insurance if HMRC considers you to have been running a business.

This is likely to be the case if being a landlord is your main job, you let more than one property or you’re actively buying investment properties.

For 2022-23, the calculations are more complicated than usual due to changes made to National Insurance contributions during that tax year. 

See our full guide and use our National Insurance calculator to find out more.

7. Don’t forget licensing schemes

If your local council runs a licensing scheme, you can deduct the costs of membership from your income.

Licensing schemes have been on the rise in recent years, but eligibility rules and costs vary significantly. 

In some areas, you might need to pay more than £1,000, but you will be able to deduct this as a business expense on your tax return.

8. Aggregate your portfolio before filing

Whether you own one home or 10, your rental profits from UK properties will be considered as one business (with one bottom line) when filing your tax return.

This means that if you made a loss on some of your properties, you can offset this against the profits you’ve made on others.

9. Don’t miss the deadlines for filing or paying

If you fail to file before the deadline, you’ll trigger an automatic £100 charge. 

Those who fail to file within three months incur additional daily penalties of £10, up to a maximum of £900.

Further penalties are payable after six and 12 months.

The cut-off for paying your tax bill is also at midnight on 31 January. 

Landlords who don’t make the deadline will be charged 5% of the tax that remains unpaid after 30 days, six months and 12 months. Interest will also be charged on late payments. 

10. File your return with Which?

For a jargon-free, easy-to-use approach to filing this year’s tax return, try the Which? tax calculator.

You can use it to tot up your tax bill, get tips on allowances and expenses, and submit your return direct to HMRC.

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