Print

How do you tax property income? How to tax rents? What deductions can you claim for a property business? How do you claim tax relief for losses on property business?

An 'At a glance' freeview guide to property profits and losses.

Subscribers click here for your detailed guide

At a glance

Property income

Property income describes income that arises from exploiting an interest in a property. Typically property income will be rental income.

A property business is not treated in the same way as trading activity for Income Tax purposes. 

Property income: what is the basis of assessment?

The profits and losses from a property business are calculated on the same basis as those from a trade or profession.

Property losses

 Loss claims: Income Tax

Loss claims: Corporation Tax

Capital allowances

A property business is a "Qualifying activity" for the purposes of plant and machinery capital allowances, but capital allowances claims are restricted for the letting of a dwelling house except in certain circumstances:

Capital allowances are not generally available under the cash basis, but some assets may qualify. See Adviser guide: Property profits and losses. 

Wear and Tear Allowance or repairs and renewals to furniture?

The ‘Wear and Tear Allowance’ has been replaced by the Replacement of Domestic Items Relief.

Up to April 2016 taxpayers could claim either:

Lease premiums

Joint Property

Deductible expenses

Property businesses may deduct expenses as long as they are:

  1. Incurred wholly and exclusively for business purposes and
  2. Not of a capital nature.

It follows that many of the allowable deductions will be on the same principles as for trading business. See What expenses can I claim?.

Motor expenses

Finance Act 2018 added the use of authorised mileage rates for landlords but with certain restrictions.

Rent A Room relief

VAT

Rental income is generally exempt from VAT. The owner of a commercial building may elect to tax a building (this is under Option to Tax arrangements).

Construction Industry Scheme (CIS)

Property investors are not required to register for the CIS unless their activities turn them into property developers.

Capital gains

An individual making a profit or gain on the disposal of the freehold or a leasehold interest in property is subject to Capital Gains Tax.

A company making a profit or gain on the disposal of an interest in property is subject to Corporation Tax.

Capital gains tax reliefs

Disposal of you home or second home

Disposal of a property 

Links:

This guide should be read with our Property profit & losses tax toolkits: