Do Buy To Let Landlords Pay Tax?

Before we delve into the tax situations let’s have a look at whether Buy To Let landlords pay tax and what you’ll have to pay if you are one. Firstly, we need to understand exactly who Buy To Let landlords are. As the name suggests they are people who rent out property to others, regardless of the intent when the property was purchased. With the rise of accidental landlords where home owners have let out their own home whilst living elsewhere, many are left wondering whether you have to pay tax or how much tax you will have to pay? If you’ve been wondering just that, then please read on.

For Buy To Let landlords with properties that they are renting out, you will be expected to pay tax on profit made from rent paid by your tenants at the property. From the 6th April this year (2021) it is the first year where landlords cannot offset mortgage expenses from the rent received instead they can only claim a 20% tax credit on interest payments due on the loan (regardless of tax status as a higher rate tax payer or additional rate tax payer). This is only applicable for those that hold a buy to let in their own name, and is driving an increase in properties being owned under a limited company where the mortgage interest is classed as a business expense reducing profits by 19%.

What other expenses can I claim?

  • water rates, council tax, gas and electricity
  • landlord insurance
  • costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
  • letting agents’ fees
  • legal fees for lets of a year or less, or for renewing a lease of less than 50 years accountant’s fees
  • rents, ground rents and service charges
  • direct costs such as phone calls, stationery and advertising for new tenants

What else do I need to know?

It’s important to know what you need to pay as a Buy To Let landlord as you need to be legally compliant with everything that HMRC demands of you. Other things you’ll need to do, include letting your mortgage provider know when you have started to rent your property out as this is something they must be made aware of, not all lenders will allow a consent to let on a regular residential mortgage. You will also need to update your house insurance to cover tenants, you can also access specialist landlord insurance. Failure to be legally compliant as a Buy To Let landlord can not only lead to you not being able to rent the property out but can also leave you susceptible to huge fines and even legal action from HMRC.

If you want to know more about what you have to pay for and what you can claim as a Buy To Let landlord why not get in touch with a member of our team here at D&K Accounting. We will be happy to look at your situation in specific and advise you on what you need to be complying with.

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