When a property is rented out it is a legal obligation to declare any profits to HMRC. However, it is often the case that a loss will result; in this circumstance, these losses can be used to reduce future profits.
We complete rental accounts showing a full reconciliation of income and expenditure and complete the property pages on the self-assessment tax return.
Q: Do I have to declare my profits?
A: Yes, you have a legal obligation to inform HMRC of all rental profits and maintain accurate records.
Q: Will I get higher rate tax relief on my mortgage interest?
A: No, tax relief is capped at 20% (current basic rate).
Q: Should I declare rental losses?
A: Yes, as any losses arising can be carried forward and used to reduce future tax bills.
Q: Will I have to pay capital gains tax when I sell my property?
A: If you sell a property, you might need to pay capital gains tax (CGT) on the profits you make.
Q: If I sell my property, when is CGT payable?
A: An online declaration must be made and any tax should be paid to HMRC within 60 days of completion. The online declaration should be made, regardless of whether or not CGT is due.
Stamp duty is paid at the following rates if, after buying the property, it is the only residential property you own. If you own another property, you would usually pay an additional 3%.
Property or lease premium or transfer value SDLT rate:
Up to £250,000: Nil
£250,001- £925,000: 5%
£925,001 - £1.5 million 10%
Above £1.5 million 12%
You can claim a discount if you're buying your first home, so that no SDLT is due up to £425,000 and 5% is due between £425,001 and £625,000.
There is no discount if you buy a property valued over £625,000, when the SDLT rates above apply.