Time is running out for landlords to file their self-assessment tax returns for the 2022-23 tax year.
The deadline is midnight on Wednesday 31 January, and if you don't file on time, you'll be hit by an automatic £100 fine.
This means it's best to file with plenty of time to spare. Here, we share our top tips on submitting your tax return.
Which? tax calculator
Our jargon-free tool can help you tot up your tax bill and send your tax return directly to HMRC.
Calculate your tax bill
1. Find out if you need to file a return
This depends on how much money you brought in from buy-to-let between 6 April 2022 and 5 April 2023.
You're entitled to receive £1,000 in rental income each year without paying tax on it.
This is called your property allowance, and it applies across your portfolio as a whole, not per property.
If you received between £1,000 and £2,500 in rental income, you'll need to contact HMRC to check if you'll need to complete a return.
If you received more than £2,500, you'll need to register for self-assessment and submit a tax return.
- Find out more: self-assessment tax returns
2. Work out your taxable income
If you're an individual landlord (your properties are owned in your name, rather than via a company), your buy-to-let profits will be taxed at the same rates as employment income.
The income tax bands for the 2022-23 tax year were as follows:
- Tax-free: £0 to £12,570 – 0%
- Basic rate: £12,571 to £50,270 – 20%
- Higher-rate: £50,271 to £150,000 – 40%
- Additional rate: £150,001-plus – 45%
Rates and bands differ in Scotland.
How to calculate your bill
When calculating your tax bill, you'll need to add your rental profits to other income you earned during the tax year.
For example, if you earn £45,000 in your day job, you'll pay tax on the money earned above £12,570 at the basic rate of 20%.
If you then add £15,000 in rental income (making a total of £60,000), this would push you into the next tax bracket.
This means you'd pay 20% on your income between £12,571 and £50,270, then 40% on the remaining £9,730.
3. Deduct your expenses
When filing your return, you're allowed to deduct expenses you've 'wholly and exclusively' incurred in the process of letting properties.
Commonly, this includes outgoings such as letting agent fees, landlord insurance premiums and accountancy.
Maintenance and repair costs can also be deducted, as can the cost of replacing furniture and white goods in furnished properties – though replacements need to be like-for-like.
Utility bills and council tax payments can only be deducted if the tenancy agreement specifies that you are responsible for paying the bills, not the tenant.
- Find out more: tax-deductible expenses
4. Keep track of small costs
Over the course of the year, you're likely to have incurred lots of minor costs, some of which you'll have forgotten about entirely.
The good news is that if you have kept records, minor outgoings such as the cost of phone calls to tenants and travelling to rented properties can be deducted.
One word of caution. As well as having receipts, you'll need to be able to evidence these costs were incurred exclusively for business use.