If you earn money from property, whether by renting out your first home or hosting the most opulent flats on AirBnB, you will most likely have to pay some taxes.
In this post, we’ll go over the many types of property income, as well as the taxes that must be paid and the tax credits that can be claimed.
What exactly does property income entail?
Property revenue refers to any money earned from land or structures. For example, you could make money by renting out your flat. This is an obvious one, but there are other sources of property money you may not have considered, such as renting out a parking space.
There are many gray areas that might be tough to navigate, but when filing your Self-Assessment, you must determine whether your earnings are from property income.
How can I determine whether my income is deemed property income?
Property income refers to any non-trade earnings derived from land or constructions. A farmer, for example, who converts a barn into an arts and crafts workshop earns trade revenue rather than property income because they are using the space to generate money through commerce. Renting out the empty space to someone else would result in property income.
Another excellent example is if you operate a hotel. The trade is hospitality, thus the revenue you receive is not tied to property.
Check out: Taxes on various types of Property Income
Different types of property revenue
Rental revenue – This is perhaps the most common; it is the money you make from renting out a property to tenants.
Furnished holiday lets are when you rent out your property for a short period of time, such as to vacationers or business visitors. It is important to remember that FHLs will no longer be subject to special tax legislation as of April 6, 2025.
Other property earnings is slightly bigger, but examples include giving away land, renting out a parking space, or leasing mineral rights.
You could be making money from your property without realizing it. For example, if you inherit a house and decide to sell it, you may have to pay capital gains tax.
How much tax will I have to pay on my property income?
Property income, like most other types of income, is taxable unless it is subject to exemptions or allowances, such as the property allowance.
This is similar to the trade allowance, which allows you to earn up to £1,000 from property or land tax-free without having to declare it to the HMRC. If one or more of you jointly own a property, you are all entitled for this benefit. If your income exceeds the property allowance, you must notify HMRC; however, this does not mean you will have to pay tax. It all depends on your salary.
How can I submit a claim for property allowance?
You can decide how to spend your property allowance. You can approach this in two different ways. seeking the property allowance ‘full relief’ or ‘partial relief.’
If you are looking for an accountant to help you with your queries related to your business accounts, Call at 020 35765107 or send a message to book a free consultation. Learn more about our online accounting services and pricing.
Note: It must be noted that the information provided in all our blogs are solely for the awareness purposes and are designed with the intention to create an ease for the reader to understand the rules and their importance. However, it should never be considered as an ultimate replication of rules. RezEx Accountants (RezEx Ltd) does not own any responsibility for any unpleasant event that may arise due to misinterpretation of a specific part or whole of the information.
