Free Accounting Advice (UK) — Clear Answers for Landlords & Businesses

If you receive rental income from UK property, you need to understand how it is taxed and what records to keep. This section covers the basics for landlords, whether you own one property or a growing portfolio.

Allowable expenses for landlords

Allowable expenses are costs you can deduct from your rental income before calculating tax. Common examples include:

• Letting agent and property management fees
• Repairs and maintenance (not improvements)
• Insurance premiums for the property
• Accountancy fees and legal costs
• Travel costs for property inspections
• Mortgage interest (subject to Section 24 restrictions)

Section 24: mortgage interest restrictions

Section 24 changed how landlords claim tax relief on mortgage interest. Instead of deducting the full amount from rental income, you now receive a 20% tax credit. This particularly affects higher rate taxpayers and can push some landlords into a higher tax band on paper.

Record keeping for rental income

Keep records of all rental income received and expenses paid. This includes bank statements, invoices, receipts, tenancy agreements, and mortgage statements. Records must be kept for at least 5 years after the 31 January submission deadline.

Common mistakes landlords make

• Confusing repairs with capital improvements
• Not registering for Self Assessment in time
• Missing the Section 24 impact until tax is due
• Poor record keeping leading to missed deductions

Running a UK limited company means dealing with Corporation Tax, annual accounts, and often payroll. This section explains the basics for small company directors.

Corporation Tax basics

Corporation Tax is the tax your company pays on its profits. The current main rate is 25% for profits over £250,000, with a small profits rate of 19% for profits under £50,000. Marginal relief applies between these thresholds.

Salary vs dividends for directors

Directors often take a mix of salary and dividends. Salary is subject to income tax and National Insurance but is a deductible company expense. Dividends are paid from after-tax profits and taxed at dividend rates, which are lower than income tax rates for the same amount. The optimal mix depends on your personal circumstances.

Year-end accounts and filing

Every UK limited company must file annual accounts with Companies House within 9 months of the accounting year end. Corporation Tax returns must be filed within 12 months, and Corporation Tax paid within 9 months and 1 day.

What triggers penalties

• Filing accounts late with Companies House
• Filing your CT600 late with HMRC
• Paying Corporation Tax late
• Failing to file a confirmation statement

Self Assessment is how individuals report untaxed income to HMRC. This includes rental income, self-employment, capital gains, and certain other sources. Here is what you need to know.

Who needs to file a Self Assessment return?

• Self-employed individuals
• Landlords with rental income
• Company directors
• Higher earners with income over £150,000
• People with capital gains to report
• Those with untaxed foreign income

Key deadlines

The tax year runs from 6 April to 5 April. For online returns, the deadline is 31 January following the end of the tax year. Paper returns must be submitted by 31 October. Any tax owed is also due by 31 January.

Information you will need

• Unique Taxpayer Reference (UTR)
• National Insurance number
• Records of all income (employment, self-employment, rental)
• Records of allowable expenses
• P60 or P45 from employers
• Bank interest and dividend statements

Common mistakes to avoid

• Missing the registration deadline
• Forgetting to include all income sources
• Not claiming all allowable expenses
• Leaving submission to the last minute

Value Added Tax (VAT) is a tax on goods and services. If your business exceeds the VAT threshold, you must register. Here is an overview of how VAT works for UK businesses.

What is VAT?

VAT is a consumption tax added to most goods and services sold in the UK. VAT-registered businesses charge VAT on their sales (output VAT) and can reclaim VAT on their purchases (input VAT). The difference is paid to or reclaimed from HMRC.

VAT registration threshold

You must register for VAT if your taxable turnover exceeds the threshold in any rolling 12 month period, or if you expect to exceed it in the next 30 days. Some businesses choose to register voluntarily below the threshold to reclaim VAT on purchases.

VAT return frequency

Most businesses submit quarterly VAT returns. The deadline is usually one month and 7 days after the end of the VAT period. Under Making Tax Digital, returns must be submitted using compatible software.

Common VAT errors

• Reclaiming VAT on non-eligible items
• Applying the wrong VAT rate
• Missing the registration deadline
• Poor record keeping leading to errors on returns

If you employ staff or pay yourself a salary through a limited company, you need to run payroll. This section explains the basics of PAYE and Real Time Information (RTI) reporting.

When do you need payroll?

• You employ staff (even part-time)
• You pay yourself a salary as a company director
• You have a nanny or household employee

Real Time Information (RTI)

RTI is the system for reporting payroll information to HMRC. Every time you pay an employee, you must submit a Full Payment Submission (FPS) showing what they have been paid and the tax and National Insurance deducted. This is usually done on or before the payment date.

Director payroll basics

Directors often pay themselves a salary at or just below the National Insurance threshold to minimise employer NI while maintaining state pension entitlement. The exact amount depends on current thresholds and your personal situation.

Common compliance risks

• Late or missed RTI submissions
• Incorrect tax codes
• Not paying PAYE to HMRC on time
• Misclassifying workers as self-employed

Missing tax deadlines in the UK leads to penalties and interest. Here is a quick overview of key deadlines and what happens if you miss them.

Self Assessment deadlines

• 31 October: paper return deadline
• 31 January: online return deadline and payment due
• 31 July: second payment on account (if applicable)

Corporation Tax deadlines

• 9 months and 1 day after year end: Corporation Tax payment due
• 12 months after year end: CT600 filing deadline

VAT deadlines

VAT returns and payments are typically due one month and 7 days after the end of your VAT quarter. Direct debit users get an extra 3 working days.

Late filing penalties

Self Assessment: £100 for 1 day late, increasing over time. Companies House: starts at £150 and doubles for subsequent offences. HMRC penalties vary by tax type and duration. Interest is charged on late payments from the due date.