There are two aspects to consider - the rental income and the tax-allowable or permitted expenses. In broad terms, tax will be due on the difference between these two.

Rent received

Any rent the owner recieves from the tenant, whether their tenancy is short-term or long-term, must be declared to HM Revenue and Customs (formerly HM Customs and Exceise and the Inland Revenue).

Expenses Incurred

Expenses will be incurred through ownership of the property and some of these expenses can be deducted from the rent received. Permitted expenses usually include:

• Gardening
• Council Tax
• Heating and lighting costs
• Letting Agent's fees
• Accountancy fees
• Repairs to the property

Any interest paid on a loan to buy the property will usually be treated as a tax-aallowable expense. A reduction to the amounts of expenditure claimed might be needed to recognise any periods when the owner uses the property for their own occupation.

Holiday Letting

If certain conditions are met, HM Revenue and Customs allow some rented-out properties to be designated as 'holiday lettings'. These conditions include the maximum amount of time the property can be let to any one tenant. If the conditions are met, the holiday letting can be treated as if it were a trade and so qualify for such items as business asset taper relief which can promote significant tax savings.

If you are thinking of buying a second property, contact us and we will be happy to advise you on the tax position.