Financial responsibilities if you rent out a property

You may be a professional buy-to-let landlord, or you may rent out your home as an ‘accidental landlord’ because you need to move out of your home, to trade up or rent somewhere larger. Whatever your situation, make sure you’re aware of your financial responsibilities. We also offer links to more information on your legal responsibilities.

Watch our short video to learn more about your financial responsibilities if you rent out.

Read a transcript of this video

Inform your mortgage lender

You need to let your lender know that someone other than you will be living there. Depending on how long the arrangement is for, you may need to switch to a different mortgage.

Read our guide Buy-to-let mortgages.

If you’re choosing a property to rent out see our guide Buy-to-let property investments.

Tax implications

As a landlord you need to know your Income Tax and Capital Gains Tax liabilities. Here we offer an overview with links out to more detailed information.

Income Tax

From April 2017, individuals who rent their properties online, through websites such as Airbnb, will not have to pay any tax on the first £1,000 they make through this service.

Rental income is added to any other income you earn during the year – for example, from employment or savings – to calculate your tax liability. You must declare this income on a Self Assessment tax return each year.

However, you can claim certain expenses to offset against your rental income and reduce your tax bill. This includes, for example, mortgage interest payments, if you have a buy-to-let mortgage, letting agent fees and maintenance costs. For the full detail follow the link below.

Read about Income Tax when renting out property on GOV.UK.

Buy-to-let landlords can offset their mortgage interest payments and some of their costs against their income. From April 2017 the higher and additional rates of relief will be phased out and restricted to 20% for all landlords by April 2020.

Capital Gains Tax

If you are selling a property that isn’t your main home – including a rental property – it’s likely that you will have to pay Capital Gains Tax on any gain (profit).

You can offset expenses of a capital nature such as replacement windows against capital gains when the property is sold. As this may be many years later it is important that you keep records and evidence of any such expenditure. Then when you come to sell check with a financial adviser or accountant what you can claim back.

Read about Capital Gains Tax on property on the HM Revenue & Customs website.

Register your tenants’ deposit with the Tenancy Deposit Scheme

These schemes are used to protect the tenants’ deposit.

In England and Wales you are required by law to place the deposit in a suitable scheme within 30 days of the date of the start of the tenancy agreement.

The first tenancy deposit scheme in Northern Ireland was introduced on 1 April 2013.

Read more about the Tenancy Deposit Scheme on the GOV.UK website.

Find out about a new tenancy deposit scheme in Scotland.

Read about the tenancy deposit scheme in Northern Ireland.

Tax rules for holiday lettings

The tax rules for full or part-time holiday lets differ from those for private renting.

Find out more about tax on holiday lets on the GOV.UK website.

You have many legal responsibilities to comply with as a landlord, including:

  • drawing up a compliant tenancy agreement
  • safety of gas and electrical appliances that you supply
  • fire safety of furniture and furnishings that you supply
  • providing an Energy Performance Certificate for the property
  • protecting your tenant’s deposit in a government-approved scheme
  • checking your tenant has the right to rent your property if it’s in England

Find out more about legal responsibilities as a private landlord in England and Wales on the GOV.UK website.

Read about Scottish landlord legal and financial obligations on the Scottish Government website.

Read about landlord legal and financial obligations on the Northern Ireland Housing Executive website.

Rent Smart Wales

A new registration and licensing scheme has been introduced in Wales. It aims to raise awareness of the respective rights and responsibilities of landlords, agents and tenants.

Private landlords will be required to register with Rent Smart Walesopens in new window. They will also have to register their properties.

If a landlord wants to manage the property themselves, they must prove that they are ‘fit and proper’ to hold a licence. They then have to undertake (and pass) approved training.

Alternatively, they will be able to appoint a licensed agent to manage the property on their behalf.

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