Property taxes - A guide for landlords

News at Waterfords | 26/05/2023

Are you Finding Property Taxes Complicated?

If you’re a new landlord in Camberley, Chobham, Fleet and Yateley, you may find property taxes complicated and overwhelming. At Waterfords Estate Agents, we are ready with some expert advice to help you better understand your obligations.

Adding Income From Property To Other Income

There’s a common misconception that any rental income you earn from your rental property in Camberley, Chobham, Fleet and Yateley will be taxed separately from your other income from shares or employment. However, that isn’t the case. While your property expenses and income are recorded on a separate area of the Self-Assessment form, your profit is added onto your other income to work out your total tax bill.

For that reason, it’s always sensible to calculate your likely property expenditure and income figures annually before investing in property. That will enable you to check whether your profit will likely take you into the next income tax bracket.

Another thing to remember is that additional income you receive from the property may mean you can no longer receive benefits such as tax credits or child benefits.

Recording Your Expenses

When completing a tax return, you should remember that some allowable costs can be deducted from the income you receive from your rental profit to reach your taxable profit amount. However, renting out your property and the money you spend on it are split between two categories.

You can offset “Revenue Expenditure” against the income you receive from your rental property. These expenses must have been exclusively incurred to earn rental income, for example:

  • Maintenance services like gardening or cleaning
  • Business administration costs
  • Repairs and redecoration
  • Insurance
  • Fees for any professional services (e.g. an accountant or lettings agent).

“Capital Expenditure”, on the other hand, is subtracted from your capital gains when you decide to dispose of your property. Those are things which increase the property’s value, for example:

  • Adding an extension.
  • Upgrading the kitchen.
  • Carrying out major renovations.

Of course, some works include both expenditures, making recording expenses more complicated. Therefore, it’s wise to use an accountant’s services.

Higher Capital Gains Tax

Although tax is levied at 10% (at basic rate) or 20% (at higher rate) on your chargeable gains on your other financial assets, tax on gains from residential property is levied at 18% or 28%, depending on your tax band. You need to factor this in when planning the exit strategy for your property investment.

Capital gains tax is levied on the difference between your property’s original purchase and sale prices, with allowable deductions and personal allowances subtracted. It isn’t charged on how much equity you have remaining. Therefore, if you decide to remortgage the property at some point to release capital, you should always ensure you have sufficient equity remaining to cover your CGT bill should you suddenly need to sell.

Handling the financial side of your rental property can be a challenge, but you can rely on our expert team at Waterfords Estate Agents to simplify the day-to-day management of your property. As experts in the Camberley, Chobham, Fleet and Yateley rental market, we make it easy for local landlords to maximise their investment.

Camberley: 01276 903006

Chobham: 01276 903006

Fleet: 01252 623330

Yateley: 01252 623330

Property Management: 01252 786064