How to Declare Rental Income to HMRC: A Complete Guide
How to Declare Rental Income to HMRC: A Complete Guide
Blog Article
Property rental can be a profitable venture, but it comes with tax responsibilities. If you earn money from letting out residential or commercial property, even informally, you’re required by law to declare that income to HMRC. Failing to do so can lead to fines, interest, and legal scrutiny.
Whether you’ve just started letting a spare room, or you’re a new landlord with a buy-to-let mortgage, this guide will walk you through how to declare rental income to HMRC accurately and on time.
Finding it difficult to Start keeping accurate records of your rental income and expenses then Contact Taxcom for handling all your queries..
What is Considered Rental Income in the UK?
Before you can understand how to declare rental income, you need to know what HMRC defines as rental income. In the UK, rental income includes more than just monthly rent payments. It encompasses all payments you receive from tenants related to the occupation of your property.
Income HMRC Considers Taxable:
- Rent Payments:
The primary source of income – this includes regular rent from tenants or lodgers. - Utility Payments and Bills:
If your tenant pays you a flat fee that includes utilities, or reimburses you for bills, that amount counts as income. - Furnishings and Services:
Charges for furniture use, cleaning services, internet, gardening, or maintenance are all taxable. - Non-refundable Deposits:
If you retain part or all of a deposit due to tenant damage or unpaid rent, this must be included in your declared income. - Lease Premiums:
For longer-term leases (over 50 years), part of the lease premium may count as rental income. - Holiday Lets and Airbnb:
Income from short-term lets also qualifies as rental income and must be declared, even if you only rent occasionally.
Understanding what counts helps you avoid underreporting income or over-claiming deductions.
Call to Action: Review all payments from tenants – even incidental ones – and include them in your rental income records.
When and Why You Must Declare Rental Income
Knowing how to declare rental income is only part of the process — timing is just as critical. HMRC requires individuals to report rental income under Self Assessment if their income exceeds certain thresholds or meets specific conditions.
When You Need to Declare Rental Income
You must declare rental income to HMRC if:
- Your total rental income is over £1,000 per tax year
HMRC offers a “property income allowance” of £1,000. If your gross rental income is less than or equal to that amount in a tax year (6 April to 5 April), you don’t need to declare it. If it exceeds £1,000, you must register for Self Assessment and file a tax return. - You rent property through a company or business structure
Even if your share of rental income is under £1,000, if you’re letting through a business or have joint ownership structures (such as partnerships), declaration is still required. - You live abroad but rent out UK property
Non-resident landlords must still declare rental income to HMRC. In many cases, tenants or letting agents must withhold tax at the source unless you register with HMRC’s Non-Resident Landlord Scheme. - You operate furnished holiday lettings (FHLs)
These are treated differently from traditional buy-to-let income and come with separate rules and reliefs — but still require declaration. - You’ve sold or plan to sell the rental property
Capital Gains Tax (CGT) may apply, and previous rental income history may be relevant to your CGT calculation.
HMRC Penalties for Non-Declaration:
- Up to 100% of the unpaid tax in penalties
- Daily interest charges
- Potential criminal proceedings in severe cases
Don’t wait for HMRC to contact you — register for Self Assessment Through The Taxcom as soon as your rental income exceeds the threshold.
How to Declare Rental Income to HMRC
Once you’ve determined that your rental income exceeds the £1,000 threshold and must be reported, you’ll need to go through HMRC’s investigation process. Here’s a step-by-step guide on how to declare rental income to HMRC properly.
Step 1: Register for Self Assessment
If you’re a new landlord, you must first register for Self Assessment by 5 October following the end of the tax year in which you received rental income.
- Where: GOV.UK – Register for Self Assessment
- When: For example, if you earned rental income in the 2024/25 tax year (ending 5 April 2025), you must register by 5 October 2025.
- What you’ll get: A Unique Taxpayer Reference (UTR) and activation code for your Government Gateway account.
Step 2: Keep Detailed Records
You must maintain accurate, dated records for all rental income and allowable expenses. These should include:
- Rental agreements
- Rent payment receipts
- Bank statements
- Invoices for repairs, insurance, or services
- Mortgage interest statements
- Utility bills (if paid by you and included in rent)
HMRC can request records going back 6 years, so store them securely.
Step 3: File Your Self Assessment Tax Return
Each year, you must file your return by the deadline:
- Paper returns: 31 October
- Online returns: 31 January
The tax return form is SA100, and rental income is entered under SA105 (UK Property).
You’ll need to:
- Enter total rental income
- Subtract allowable expenses (we’ll cover these next)
- Declare profit or loss
- Submit online or via an accountant
Step 4: Pay Any Tax Due
The deadline to pay is 31 January following the tax year end. You may also have to make payments on account for the next tax year if your tax bill exceeds £1,000.
- Methods of payment: Bank transfer, Direct Debit, debit/credit card, or through your online personal tax account.
Step 5: Declare Future Income Annually
You must continue declaring rental income every year until you:
- Stop letting the property
- Your income drops below the threshold
- You inform HMRC and deregister from Self Assessment
Registering early and filing your Self Assessment on time to avoid fines and ensure accurate reporting of your rental income is the right thing to do. We at The Taxcom are always here to guide you with our teams of experts. Report this page