In general you’ll pay income tax on the revenue you get from renting out a property. The taxable amount is the sum left once you’ve added your rental income and deducted any allowable expenses or allowances.
Your income is primarily the rent you receive but also any other payments from tenants for services normally provided by a landlord.
If you charge any non-refundable deposits for your property, these will also count as rental income, as well as the money that’s kept over from a returnable deposit at the end of the tenancy.
Allowable expenses a landlord can deduct
As a general rule, landlords can claim the running and maintenance expenses of their rental property.
If the rent you charge covers services like gas, electricity, water, or council tax, you’ll need to take into account the rent amount you charge the tenant within your income – but you can claim the costs you pay as an expense.
Here are the most common types of expenses that you can deduct:
- Gas, electricity, water and council tax
- Costs of services, such as the wages of cleaners and gardeners (as part of the rental agreement)
- Letting agents’ fees
- Accountant’s fees
- Rents, ground rents and service charges
- All direct costs such as phone calls, stationery and advertising for new tenants
The expense should be incurred wholly and exclusively as a result of renting out your property.
If only part of the expense meets this condition, you can also deduct that part of your income. For example, when renting part of your home, the cost of heating the property which is partly used for renting as well as private purposes.
More information are available and updated regularly on a dedicated section of GOV.UK.