Property rental and tax
Profit from letting property is liable to income tax. However, interest on a loan to purchase or improve your letting property is deductible for tax purposes. Where several properties are owned and let, the profits and losses are aggregated for tax purposes.
In general, let property is at a disadvantage for CGT and inheritance tax purposes, as it is not recognised as a business asset. Furnished holiday letting, however, is an exception to this rule. These privileges are conditional on compliance with stringent rules as to personal enjoyment, which many find too onerous.
HM Revenue & Customs' rules concerning rented property view this as any other business. Tax is charged on profit, and returns should be made.
Lodgers/renting out rooms
HM Revenue & Customs runs a scheme called Rent A Room for those people who take in lodgers, providing a room and usually breakfast.
Where the income over a year is less than £4,250 (£81.70 a week), you do not have to declare this income. This saves you having to do a Self Assessment return!
If the income is more than that, only income above that annual figure is liable to tax. You can also include costs to offset against income. In this way, it is seen as a small business where costs, such as food, cleaning products and other sundries can be used to reduce tax liabilities.
If you rent out property, contact us to discuss how we can help you get the best from your investments and holdings.