Landlords are required to disclose their rental income on their annual tax return. Below is an overview of the income and expenses that could be included when calculating rental profit.
Rental income is normally taxed on the accruals basis. This means you are taxed on the rent payable in the period spread evenly over the rental contract, regardless of when you actually receive the payment of the rent. If your rents receivable are less than £15,000 per year HMRC will allow you, by concession, to be taxed on the rents received basis. The normal types of income to be included as rental income would be:
- Rents paid by your tenants
- Any money retained from your tenants’ deposits to pay for dilapidations
- Insurance proceeds received in lieu of lost rents
- Premiums received