Rental income tax

[FriendlyLaundryMonster]

I’ve inherited a property recently which is providing rental income. Any tips on how to arrange things best for tax?

You submit an annual self assessment to HMRC to pay income tax on the rental. There are a few costs you can offset.

Thanks, yes. I'll do this. Just found out today that we can share rental income as a couple inequally for tax purposes, which I wasn't aware of previously. Just wondering if there's anything else I don't know that I don't know!

You can only share the income if you both own at least part of the property.

You can do a declaration of trust but obviously that means you are giving away part of a valuable asset so you should think this through and take advice.

Thank you, yes we both own part of the property.

There's very little extra you can do to reduce you tax liability on rental income these days, it been tapering off for a few years. I owned some property jointly with my ex, some solely and I couldn't share my liability for the tax on the properties I owned alone. It's a separate tax band and doesn't count towards income for things like the 30 hrs funded childcare. You could do the return yourself but an accountant would probably do it for a few hundred.

I suggest you watch the very helpful HMRC videos about how to account for rental income in your SA tax return.

You can either offset your actual, accrued costs of renting out the property (e.g. repairs, maintenance, insurance etc) or claim the £1000 property income allowance.
If you own the property jointly then you can each claim a £1000 allowance against rental income.
If your allowable expenses are greater than £1000 (as a single owner) or £2000 (as a couple) then it is better to offset the actual expenses.

If the property is owned 50/50 you can't do an unequal share of the rental income. If one partner doesn't work or earns a lot less you can transfer your marriage allowance to your partner (who earns more) they then have less tax liability minus around £1250??? Now tapering is over, all rental income is taxed as income proper (even though most will go on paying mortgages interest.- there is some relief for this on the self assessment), you can only offset what you've spent on essential maintenance of the property. You can use a reduction of £1000 in any instance, but if you spent £2000 putting a fence up (for example) it's best not to use that. It's a bit of a minefield and self assesment system is beyond farce and you will be tearing your hair out. It's so cumbersome and is poorly laid out you struggle to navigate through it. They never pick up the phone either. The system is designed to screw landlords over, even accidental ones.