Rental Income Tax

The SA105 (UK property) supplement is filed alongside the SA100 main return for any landlord with UK rental income. Multiple properties are aggregated into a single rental business — you don't file a separate SA per property. Specialist accountants build per-property P&L feeding into the aggregate SA position; generalists frequently work directly off bank statements without the per-property visibility that supports defensible HMRC responses.

Allowable expenses against rental income include repairs and maintenance (revenue), letting agent fees, legal fees on routine tenancy renewals, accountancy fees, landlord insurance, mileage to inspect properties, ground rent and service charges, advertising for tenants, replacement of domestic items (post-2016 relief replacing wear-and-tear allowance), council tax and utilities for void periods. Pre-letting refurb costs are NOT current-year revenue — they're capital, added to property base cost for eventual CGT.

Section 24 mortgage interest restriction is the biggest annual SA calculation for landlords. Since April 2020, mortgage interest can no longer be deducted from rental income; instead, finance costs receive a 20% basic-rate tax credit. For higher-rate landlords this is materially more tax than pre-2020. The restriction applies to mortgage interest specifically — arrangement fees, broker fees, valuation fees remain fully deductible. Specialist accountants get the calculation right; generalists frequently apply the restriction to all finance costs which is wrong.

Capital expenditure split — improvements creating a new asset or upgrading beyond original specification are capital, added to property base cost for eventual CGT. Like-for-like replacements are revenue, deductible against current-year rental income. The boundary catches landlords out: a like-for-like boiler replacement is revenue, an upgrade to a higher-spec system is capital. Specialist accountants apply the test correctly.

Joint ownership with spouses defaults to 50/50 income split for tax purposes regardless of legal beneficial ownership, unless Form 17 declares an unequal split that matches the legal beneficial ownership exactly. Where one spouse is in a lower tax bracket, restructuring to a 70/30 or 80/20 split can save material tax. The legal restructuring is a one-off cost; the tax saving compounds annually.

Pre-letting expenses confused with revenue — costs incurred before the first tenant moves in are NOT revenue expenses. The rental business hasn't started; pre-letting refurb is capital, added to property base cost. Generalist accountants frequently treat pre-letting refurb as immediate revenue, which is wrong and creates HMRC enquiry exposure.

Replacement of domestic items relief boundary — like-for-like replacement is fully revenue; an upgrade to better-spec items is partial revenue (the like-for-like portion only) plus capital (the upgrade portion). Generalists frequently treat all replacements as fully revenue, missing the upgrade-portion split.

Mileage claims for property inspection — driving to inspect a property, attend a tenant meeting, or oversee maintenance is allowable mileage at HMRC approved rates (45p/mile for first 10,000 miles, 25p thereafter). Routinely under-claimed. For a Harrow landlord with 2-4 properties spread across HA / NW postcodes, mileage can run £600-£1,500/year.

60-day CGT reporting deadline — UK property disposals by UK residents must be reported and tax paid within 60 days of completion via the dedicated UK Property Account. Penalties for late filing: £100 fixed, daily penalties from day 90, plus interest. The deadline is widely missed because landlords assume CGT is dealt with in the next SA return — which is wrong post-2020. Specialist accountants handle the 60-day filing as soon as completion happens.

Rent-a-room scheme misapplication — the £7,500/year tax-free rental income from letting a room in your own home does NOT apply to BTL properties or to lodgers in a property that's not the landlord's primary residence. Specialist accountants identify the correct treatment; generalists occasionally misapply rent-a-room where it doesn't qualify.

Rental income loss carry-forward — net rental losses carry forward indefinitely against future rental profits. Specialist accountants track the carried-forward loss across years and apply it correctly in subsequent SA returns; generalists frequently miss the carry-forward when the next year's SA is prepared.