Self-assessment taxpayers, including landlords, have to file their tax return and pay tax for the previous financial year by the stroke of midnight on 31 January or risk a fine.
If you have any queries about the process – including whether you need to submit a return – this guide aims to explain the key steps.
If you’ve received a notice from HMRC stating that you have to file a self-assessment return, then you must do so – even if you don’t owe any tax.
There are some limited circumstances under which you can ask HMRC to withdraw the notice, such as having all income taxed under PAYE, leaving you with no extra liability – however this is highly unlikely to apply to landlords.
The deadline for registering with HMRC for self-assessment is 5 October following the tax year for which you’re filing. So, if this is your first year of reporting rental income and you haven’t already registered with HMRC, you should contact them right away to find out how to report your income.
The deadline for filing paper tax returns is 31 October, so if you haven’t yet done it, filing online is your only option.
For this, you will need a Unique Taxpayer Reference and a Government Gateway account (see next section).
You should be aware that the Government intends to move everyone over to a new online-only tax filing system through its Making Tax Digital (MTD) plan. This requires individuals and businesses to submit quarterly returns (via MTD compatible software) and will apply to landlords with annual business or property income of more than £50,000 from 6 April 2026.
Those with an income of between £30,000 and £50,000 will need to do this from April 2027. Most taxpayers will be able to join voluntarily beforehand, meaning they can eliminate common errors and save time managing their tax affairs.
So, once you’ve filed this year’s return, it may be worth looking into exactly what’s required and discussing it with your property tax expert so you can make sure you have the most appropriate software.
You need two things to access your online tax account and file your tax return:
1. A Unique Taxpayer Reference (UTR).
This is a 10-digit code that HMRC uses to identify you and keep track of your tax records. If you’ve received a notice to file from HMRC, your UTR should be on the letter. If this is your first time filing and you don’t already have a UTR, you can apply for one on GOV.UK. The application process takes ten working days, so the final application date for the current tax year will be 18 January. That said, if you need to file a return, it’s best to apply as soon as possible. If you’ve lost or forgotten your UTR, you can contact the Government’s self-assessment enquiries department.
2. A Government Gateway or GOV.UK Verify account.
This is a registration process that will generate a user ID, which will also allow you to sign into HMRC’s online services. Creating a Government Gateway account is a relatively straightforward matter of entering your details and verifying your email address. The GOV.UK Verify system is a third-party, government-approved provider that checks your identity documents and helps protect you against online identity theft. Once you’ve used your Government Gateway or Verify ID to sign into HMRC, you then enter your UTR to access your personal tax account.
Landlord tax returns can be complicated because the tax you pay isn’t just based on your property specific income and capital gains, it’s based on all of your earnings, so if you have a salary and other assets you have disposed of, all of this will need to be reported. The information provided below is only a guide to the main taxes relating to property earnings. In view of this, we would always advise you to seek advice from a tax professional when filing your tax returns. If your rental income is higher than your expenses – i.e. you make a profit – you must register those profits so you can be taxed on them.
The dates can also be confusing: the return you are submitting in January 2024 is for the tax year 2022/23 to 5 April 2023. In January 2025 you will be submitting your 2023/24 tax return to 5 April 2024.
If your rental income for the year is below £1,000, this would be free of tax, and income only needs to be reported via self-assessment if it’s above £2,500.
If your income from property is under £2,500, contact HMRC.
Profit from your properties is then added to any other income earned. For this tax return, the 2022/23 tax year, you will be taxed at 20% on earnings falling between the personal allowance of £12,570 and basic rate upper threshold of £50,270, and 40% on any amount between that and £150,000. Earnings over £150,000 will be taxed at 45%. You may also have to pay National Insurance, but this can be quite a complex issue, so it’s best to speak to a professional to check your obligations.
For next year’s tax return, the tax year 2023/24, there is a rates change to:
For those living in England, Wales and Northern Ireland as above, under your personal allowance (PA) of £12,570, for most people no income tax is payable. Between your PA and your PA + £37,700 you pay the basic rate at 20%, that is for most people, over £12,570 to £50,270. Between your PA + £37,701 and £125,140 (the higher rate), that is for most people over £50,271 to £125,140 it’s 40%. Over £125,140 and you pay the additional rate at 45%.
The GOV.UK website has a list of ‘allowable expenses’ landlords can claim to reduce tax. These are costs you incur in the day-to-day running of your property business, including:
It can sometimes be hard to work out what’s an allowable expense and what isn’t, so it’s worth speaking to a property tax expert. They can make sure you only claim legitimate expenses and, importantly, could make you aware of things you hadn’t realised you could claim for.
The following self-assessment late-filing penalties apply, regardless of whether tax is owed or not. The later you file, the greater the financial penalty will be:
If you are late by one day it’s £100, if you’re late by three months it’s another £100. In the case of Corporation Tax, after six months HM Revenue and Customs (HMRC) will estimate your bill and add a penalty of 10% of the unpaid tax. After 12 months it’s another 10% of any unpaid tax. If your tax return is late three times in a row, the £100 penalties are increased to £500 each.
HMRC may also impose other penalties and interest on top of the above.
It goes without saying that the best way to avoid late filing penalties is to file on time.
Even if you haven’t managed to get all your final figures sorted out by 31 January, you are able to make changes to your self-assessment return to correct errors for up to a year after the initial filing deadline.
It’s far better to file an incomplete or estimated return and amend it later than to file nothing. You can use the ‘additional information’ box on the return to tell HMRC that the figures are provisional, explain why and let them know when the full return can be expected.
There are a few reasons that HMRC will accept an appeal for not filing on time. These include:
Yes, tax returns can be complicated and they are a bit of a pain. But filing your tax return ahead of time is cheaper, easier and far less stressful than leaving it to the last minute and risking it being late.
HMRC may require you to make ‘payments on account’ – advance payments that go towards potential tax owed under self-assessment in the following tax year.
To help make sure these payments are manageable, HMRC splits them into two, the first being due on 31 January and the second on 31 July. Each payment represents 50% of the previous year’s tax bill.
For example:
When filing your 2022/23 tax return, you discover that payments on account fall due, in addition to the tax you owe under self-assessment.
When you prepare your return for the 2023/24 tax year, if you owe more than £4,000, the balancing payment will fall due on 31 January 2025. If you owe less, you will receive a refund from HMRC.
Depending on circumstances, payments on account may continue the following year or cease.
If it looks as though you’re going to earn less this year than you did last year, you can apply to reduce any payment on account due. However, you should only do this if you genuinely need to, as you will end up making up the difference at a later date and underpayments are likely to be charged interest. If you happen to end up overpaying, HMRC will automatically issue a refund to your account.
If you file your return before 30 December and owe less than £3,000 in tax, as long as your income levels are sufficient, you may have the option of adding that £3,000 liability to your 2024/25 PAYE code (if you have one) rather than paying in full by 31 January. If this option is available to you, it should appear in your online tax account.
If you’re experiencing some financial difficulty and will struggle to pay your tax bill in full, you may be able to set up a payment plan with HMRC. To do this, all the following must apply:
It’s fairly straightforward to set up a payment plan via your online tax account, or you can contact the Self-Assessment helpline. Be aware that you will accrue interest on the outstanding balance, so it’s better to settle your tax bill as soon as possible. And if you don’t stick to your payment plan as agreed, HMRC can ask you to pay everything you owe immediately.
Tax can be confusing – even for accountants. So, it’s a good idea to check on your payments and current tax status every now and again by logging in to your HMRC account.
Keeping on top of what you owe and what you’ve already paid means you’ll avoid any nasty surprises and will minimise the risk of overpaying. You can also contact HMRC if you have any concerns. If you’d like to gain a better understanding of property tax – including what you need to pay, when to pay it and how you can substantially reduce your landlord tax bill – why not attend one of the NRLA’s tax training courses for landlords?
