Your Ultimate Guide to Landlord Tax Returns
Being a landlord is exciting. Whether you are a full time landlord or are venturing out into the world of property rental for the first time, there are a large number of perks associated with being a property owner and taking in a number of tenants.
Regardless of whether you are a landlord with just one property let out, or whether you are running your own small property empire, there is some admin to take into account – not least sorting out what you need to do from a tax perspective.
Well, don’t worry! If the thought of completing your landlord tax returns fills you with dread, if you don’t know the difference between your SA100 and your SA105, or if you have a query about how to submit your return online, then you have come to the right place. Through the course of this page we are going to explore landlord tax returns in detail, and help you make your tax more doable.
Part 1: Landlord Tax Returns: The Basics
Before we dive into the details of what is included with your landlord tax returns, let’s look at some of the basic information surrounding the return, such as: Who needs to fill in a tax return? What tax returns do landlords need to submit? How is the new Making Tax Digital affecting the world of landlord tax?
Who needs to fill out a Landlord Tax Return?
So, there is a simple answer to the question as to who needs to fill out a tax return as a landlord and that is: are you a landlord? If the answer is “yes”, then you will most likely need to fill in a tax return (if your rental income is less than £1000, and any other income is earned through employment, then you may be exempt). If you answered “no” but you earn money from self employment or outside of PAYE then our guide to self-assessment tax returns may be more relevant for you.
That said, there is a slightly more complex answer and it revolves around the types of tax returns that landlords need to complete.
How do I complete a Landlord Tax Return?
When you’re a landlord, things are slightly more complex than if you are simply self-employed. What this means from a tax perspective is that there are actually two different sections on the self assessment tax return that you need to fill in. Those are the SA100 and the SA105.
What are the SA100 and the SA105? Well, we’re glad you asked.
The SA100 is the “standard” self-assessment form. This is the mandatory form that is the basis of any kind of tax return, and is needed to be completed when:
You are a landlord and get more than £1000 from renting out a property (this is almost certainly why you are reading this article!)
You are self-employed as a sole trader and have earned more than £1,000
You are a partner in a business partnership
You get income from trusts, settlements, and estates
You have a job where you receive large amounts of tips or commission
You get money from investments, get income from savings, or get income from dividends
You get income from trusts, settlements, and estates
You are a trustee
You get income from a foreign source on which UK tax is due
You are a company director with income that is not covered under PAYE
You are a non-resident but have taxable income from the UK
On top of that, landlord tax returns vary slightly because they have an additional form that needs to be filled in. That form is the SA105 (please note that landlords with overseas property may also need to fill in the foreign income pages (SA106)).
The SA105 comprises two additional pages that are attached to the SA100 so they can be submitted together.
You have to fill in a SA105 form if any one of the three applies to you:
You gain rental income of more than £1000 from properties within the UK (you can choose to submit an SA105 if you have income less than £1000)
You get income from letting furnished holiday accommodation in the UK
You get income from letting furnished holiday accommodation in the EEA
You do not need to fill in a SA105 if:
You gain income from foreign properties (there are separate foreign property pages for this)
You have a capital gain from selling property
You gain income from Real Estate Investment Trusts (REIT)
You gain income from peer-to-peer property loans
How is Making Tax Digital affecting Landlord Tax Returns?
As with self employed taxpayers, there are changes coming within the world of landlord tax returns. Making Tax Digital is a program designed to make submitting tax returns easier and more efficient for both the end user and HMRC, whilst minimising the likelihood of mistakes. When MTD takes comes into effect, there are a few ways that landlord tax submissions will change:
Income tax will be done through HMRC recognised Making Tax Digital software.
Digital records of tax eligible transactions will need to be kept for your tax return.
Self-Assessment Tax Submissions will need to be made once a quarter, with a final “round up” submission once a year.
Where this may sound like there are additional rules that may complicate matters, with the right software Making Tax Digital (also known as MTD) could actually mean the simplification of the tax process. With software, like APARI, you can store your records online, pre-populate fields, and keep a real time view of your tax affairs.
Part 2: Registering and Filling Out Your Landlord Tax Return
Okay, so now that we have explored the questions around what a landlord tax return comprises and who needs to fill one in. The next steps are to look at how to fill in a landlord tax return, looking at specific information that is needed for each of the SA100 and SA105 forms. Once filled in, how do you submit it to HMRC? Well, let’s take a look.
How do you register for a Tax Return?
The good news is that, whatever your reason for wanting to sign up for a self-assessment tax return – whether self-employed, a landlord, or for any other reason – the process is the same. On top of that, the even better news is that it is relatively easy to do. All you need to do is register for a self-assessment tax return, which in turn will include a landlord tax return (SA105) by visiting the HMRC website and following the instructions.
In order to register for your tax return you will need:
Your contact details
Your National Insurance number
Once you’ve created your account, HMRC will send you a Unique Taxpayer Reference number (also known as a UTR) via post. Following the UTR, you will receive an activation code for your account, and then you are all set. The UTR is an important part of your tax return, so it is important to keep it safe; and, you are all set to start filling in your tax return.
What information is needed for your Landlord Tax Return?
Once you’ve signed up to HMRC, and once you have both your UTR and your government gateway ID then you will be able to look at completing your tax return. This is where things can get complicated; however, they don’t need to be. Instead, with a bit of basic information at your fingertips, you can breeze through your tax forms and have your landlord tax return completed before you know it.
The first part of the tax return is the SA100 form. This is the standard, and mandatory, self-assessment tax return. To complete your SA100 you will need:
Your Unique Taxpayer Reference (UTR) number
Your National Insurance Number
Any details about income during the tax year – this can be from any of aforementioned sources including from rental income
Any details about charitable contributions that may be suitable for tax relief
Any details about your pension contributions
Your P60, or similar document, showing how much income you have already paid tax on if your additional income is over and above your current salary
On top of that, for the SA105 portion of the assessment you will also need:
Information about your properties, including the number of properties you own
Any details about Furnished Holiday Lettings
Any detail about property income
Any details about property expenses
Any calculations you have surrounding your taxable profit or loss
What exemptions are there to your tax bill?
The landlord tax marketplace is an interesting one at the moment, different property types have different taxation rules. This means that there is a long list of different exemptions that can be applied, depending on the type of rental property.
For residential properties, it is possible to deduct a number of items as “allowable expenses”. Those deductions can include (and this is in no way an extensive list):
Letting agents’ fees
Accountants fees
Buildings and contents insurance
Utility bills (if you pay them)
Rent, ground rent, or service charges
Council tax
For furnished residential lettings, it is then also possible to claim a ‘wear and tear allowance’.
For furnished holiday lets, the rules are slightly different. Plant and Machinery capital allowances can be claimed on furniture and furnishings. Likewise, Capital Gains Tax relief can be claimed, but both of those can only be claimed if:
The property is offered to let for at least 210 days of the year
It is let for over half that time (105 days)
No single let is over 31 days
You charge the going rate for your rental properties
Commercial property landlords can also claim capital allowance on certain items.
All-in-all, the number of things that you can claim on is an extensive list. You can view the full list of allowable expenses here.
What can Tax Software Help With?
So, there are a couple of things that still cannot be done via tax software and likely won’t be integrated into third party tax software any time soon – namely signing up for your return and actually paying your bill. Those must be done via HMRC – that being said, there are a number of things software, like the software we have developed at Apari, can help with.
Our software has been specifically designed with landlords in mind, and it allows you to:
Keep records of your income and expenses digitally, speeding up and simplifying your tax return process
Get an ongoing estimate of how much you are likely to owe in tax and when you need to pay your tax bill
Submit through MTD once it comes into effect
Save time with our software, allowing you to manage jointly owned properties, and keeping admin simple
Submit your tax return firstly for both MTD and Self-Assessment Tax Returns, including your SA105.
How do I work out my Landlord Tax bill?
The first step to working out your landlord tax bill is first to work out your profit. You can do this with a relatively easy calculation.
In order to work out your profit, you need to first separate out any furnished holiday lettings profit and expenses from any other rentals. This is to ensure that they are eligible for the right forms of relief. Once you have done that, the calculation is simple:
Add together all your income from rental properties (separating out the furnished holiday lettings)
Add together the relevant expenses
Subtract the expenses away from the property income
Do the same for commercial/residential lettings and for furnished holiday lettings. You will then have two different numbers, showing the profit. All of this can be made simpler by using a software like APARI, where we will help you make the most out of your tax situation and calculate your taxable profit, deducting your expenses and working out your final tax bill.
There are, of course, other ways of calculating your landlord tax bill – including by using an accountant or being really savvy with an Excel spreadsheet. If you do prefer the old fashioned way (and they do have their place) then you can submit your return to HMRC and they will send you a bill in return. That bill can be seen in the online account of the HMRC portal, up to 72 hours after you have submitted your tax return online.
If you prefer the paper method of return then HMRC will send you your bill once they have processed your tax return - please be aware that the deadline for submitting paper returns is the 31st October following the end of the tax year.
What other forms of Tax Return are there?
Throughout the course of this article, we have mainly explored the SA100 and SA105, being the core tax return and the UK property income form. Those are the two main forms for landlords; however, depending on your portfolio of business activity, you may be interested in other types of tax return forms.
Additional forms that you may want to explore, as well as the SA100 and SA105 forms include:
SA102 – for employees or company directors
SA103S or SA103F – for self-employment
SA104S or SA104F – for business partnerships
SA105 – for UK property income
SA106 – for foreign income or gains
SA108 - for capital gains
SA109 – for non-UK residents or dual residents
You can find out more about the various different tax returns here.
Can I fill in my Self-Assessment Tax Return using software?
Absolutely! It is 100% possible to fill in your landlord self-assessment online!
By using HMRC recognised software like APARI, it is possible to manage and submit your tax return online. As well as being able to help with SA100, we can also aid with SA102, SA103, SA105, SA109, and SA302. Our job is to help you make tax doable across a wide spectrum of different tax forms.
Part 3: Payment and Deadlines
You’ve now filled in your landlord tax return. You’ve dotted the i’s and crossed the t’s, everything has been bundled up and sent to HMRC, either by post, via the HMRC portal or via software. What are the next steps? Well, this is where it gets interesting – let’s talk about paying your bill and what happens if you can’t pay your bill.
How do I pay my tax bill?
Earlier on in this guide we mentioned there being a couple of things that cannot be done via third party software – and those two things were signing up for tax returns and paying your final bill. To pay your tax bill, HMRC will either send you a digital copy or a physical copy of the bill. From there, HMRC make it as easy as possible to pay your bill, and have seven different methods of payment they accept. Those seven different methods are:
Direct Debit
Through online banking
Through CHAPS
Through a debit or corporate credit card online
At your bank/building society
Bacs
By cheque
For peace of mind it is best to not leave paying your bill until the last moment. Depending on the method you choose, you may need to wait up to five working days for payment to clear.
What if I can’t pay my tax bill?
One of the best things about the HMRC and the UK tax system is that there are options in place should you not be able to pay your tax bill on time for whatever reason.
If you are unable to pay your tax bill then you need to keep HMRC in the loop and let them know as soon as possible. Through acting quickly it is possible to explore your options and arrange an alternative. For instance, if the amount owed is under £30,000 then it may be possible to set up payments as monthly instalments over the next year. This will allow for you to pay what you owe over time as opposed to paying it in one go.
It’s important to note that HMRC will charge interest on the amount that you owe, so if you pay late you will need to pay extra on top of the core amount. You can find out more about your options if you cannot pay your self-assessment tax return bill here.
What are the deadlines for filling out my Landlord Tax Return?
No matter whether you are filling in a SA100 as a self-employed professional, or a SA100 and SA105 as a landlord, the deadlines are the same. The current deadlines are:
5th October – Registering for self-assessment/your landlord tax return
31st October – Paper tax return (if you have chosen to do a paper return as opposed to an online return)
31st January – Online tax returns and paying any balance on the previous year tax
That being said, there are changes on the horizon. When Making Tax Digital comes into effect, the self-assessment deadlines are going to change. Rather than one large submission in October or January (depending on your submission method), HMRC are introducing 5x the submissions, spread throughout the year. The five different submissions are equivalent to four quarterly submissions, followed by one final submission at the end of the year.
Although this may seem like more stress, it will break down the tax submission process, and this could make it easier to keep track of using the right software (like with APARI). Although it may be 5x the submissions, at APARI we are dedicated to making it 10x easier. More doesn’t necessarily mean harder!
What are the penalties for not completing my Tax Return on time?
Yes, you guessed it. One of the biggest benefits of submitting your tax return on time is that you can avoid penalties for late submission.
So, what are the penalties? If your return is up to 3 months late then there is a fee up to £100, plus interest on any late payments. If your landlord tax return (SA100 plus SA105) is over 3 months late then the fine could be much larger.
If there is a good reason for not having filed your return then you can always appeal any fine or penalty. Be warned though that if your tax return is late then it needs to be a good excuse. If you do not have a good reason for your tax return being late then you will end up having to pay the penalty anyway.
Part 4: Software, Accountants, and Moving Forward
So far we have covered a large amount of detail surrounding landlord tax returns, and covered a lot of ground. We’ve covered what they are, how you submit them, and what the future may hold; however, although we have explored the practicality, there are still a few logistical questions that remain. In this final section we are going to explore software, accountants, and what your next steps could be.
Should I pay an accountant to do my Landlord tax return?
There are a lot of different options when it comes to dealing with your finances. There are three core ways of handling your tax return. The first is with software, which we have mentioned several times throughout this guide. The second option is to use an Excel sheet, which although is currently one of the more popular methods, will not be an allowable method of record keeping once HMRC’s new tax system, Making Tax Digital (MTD) comes into effect. Finally, there is using an accountant.
So, with excel spreadsheets soon to be a thing of the past, we are left looking at the two remaining options - using an app and using an accountant. So when is it a good idea to use each?
Well, you may want to consider an accountant if:
You have really complicated or multi-level tax affairs
You have tax planning schemes in play
You’re not very organised, or you happen to really like your accountant
That being said, if you don’t feel like any of the above apply to you then hiring an accountant isn’t necessary. With the right HMRC recognised software (like with APARI), you can take control of your own taxes and save yourself some money whilst you are at it.
Software, like APARI, is perfect if:
You’re new to self-assessment and tax returns for landlords
You want to maintain a real time view over your tax, when you need to make payments and how much those payments will be for
You want to save time and pre-populate as much of your tax return as possible
You’re tax confident – whether you’re experienced with tax, or whether you are brand new to the system, software has its perks.
Finally, there is no doubt that Making Tax Digital is on the horizon. If you want to be ready for MTD, and whatever the tax world brings over the next few years, then migrating to software early puts you in a fantastic position to be ready for the future.
How does Landlord tax return software work?
There are a number of softwares that have been recognised by HMRC over the past few years as being software that can aid with Making Tax Digital. What this means is that software like we have designed at APARI, can be used to help manage your tax, track your profit in real time, and submit your return with ease.
There are a large number of benefits to using the APARI platform. Through APARI, you can:
Start keeping digital tax records, speeding up the process of filling in your tax returns
Easily track income and quickly allocate expenses
Scan and store paperwork like receipts and contracts
Save time with our business toolbox – this allows you to keep track of contracts and insurance, as well as get renewal reminders when you need to consider renewing
Keep your taxes safe with secure software
See your expected tax in real time
Keep a clear picture of your finances
Take advantage of cloud-based computing with mobile, tablet, and laptop integration
Be confident that we’re HMRC friendly - we’re even mentioned on the HMRC website as software that is compatible with HMRC and the UK tax system
Finally, as we move towards MTD, you can use the APARI software to transition to the Making Tax Digital system. We are MTD ready, giving you a HMRC recognised solution right at your fingertips.
How can APARI help?
Over the past article we have fully explored landlord tax and landlord tax returns, including the initial application all the way through to the submission of your tax return and beyond. The only question that now needs an answer is: How can we help you?
At APARI we are not only experts in tax, but we are experts in making tax simpler to understand and way more doable. Tax isn’t always the easiest subject to approach, and it can be daunting for landlords to approach on their own. That is why we have developed our APARI software, to make it easier to manage your tax, keep visibility over your finances, and plan for the future. At APARI, we want to make sure that self-assessment tax returns can be made 10x easier for landlords who want to be able to sort out their tax as efficiently and effectively as possible.
Our services are specifically guided towards landlords, as well as sole-traders and the self-employed. You can get started, for free, today.