In this guide we break down everything landlords and property investors need to know about self-assessment tax returns.
Navigating the world of self-assessment tax returns can be intimidating for landlords and self-employed professionals. With so many rules and regulations to understand and jargon to decipher, it can feel like a minefield.
Thankfully, Landlord Studio is here to help. Our simple accounting software designed for landlords will help you streamline your income and expense tracking and reporting so you have accurate financial data when you need it. Make completing your rental income tax self-assessment easy.
So, if you're confused about what to pay or when, or uncertain about how to fill out a tax return, this guide is for you.
As a landlord or self-employed individual, the concept of self-assessment tax returns may be new to you. However, there is no need to worry as these tax returns are not as daunting as they may seem.
Unlike traditional employment where income tax is automatically deducted by HMRC through PAYE, self-employed individuals and landlords are responsible for reporting and paying their own taxes. Self-assessment tax returns serve as a way for you to inform the government of your income so that it can be taxed accordingly.
It is important to note that self-assessment is your individual responsibility to ensure the information provided is correct, even if you choose to use an accountant.
While the full tax return may seem complex, most people only need to complete a portion of it. Utilising software like Landlord Studio can simplify the process and make it less intimidating.
As you embark on your journey as a landlord, remember to take pride in your new adventure and don't let the prospect of self-assessment tax returns stress you out.
MTD is a new government initiative aimed at making the process of filing taxes more efficient and accurate. While the need to self-assess your taxes remains the same, there are three key changes that will affect landlords under MTD:
Submitting tax returns every quarter may seem daunting, but utilising software like Landlord Studio, which is recognized by HMRC, makes the process much simpler.
As of December 19th, 2022 MTD for ITSA is set to be phased in for landlords and self-employed professionals with over £50,000 in taxable income from April 2026. This may seem like a long way away, but in order to ensure your rental business is future-proof it pays to adopt digital solutions today.
If you would like to know more about Making Tax Digital and its implications for landlords, you can visit our page dedicated to the topic.
Generally speaking, if you’re self-employed or have additional income earned outside of your current employment (eg. rental income) then the chances are you will need to complete a self-assessment.
You will need to file a self-assessment tax return if any of the following apply:
Alternatively, there are a couple of situations where you may choose to complete a self-assessment tax return, such as proving self-employment or to help claim some forms of Income Tax Relief.
For those unsure, the HMRC has a tool you can use for determining if you need to submit a self-assessment tax return. You can find that tool here.
Now that we’ve covered the basics of what as self-assessment is and who needs to file one, the next step is to learn how to actually submit it.
There are several ways software can help you complete a self-assessment tax return.
Software, like Landlord Studio, can help you ensure your digital records are kept accurate and up to date so when it comes to tax time all you need to do is run a report. Landlord Studio is designed to make your income and expense tracking for your rentals as easy as possible with default expense categories in line with property tax requirements, and over 15 financial reports designed to help you gain a clear and nuanced oversight of your property portfolio financials whenever you need it.
There are, however, a couple of things that software can’t yet do. Namely, you can’t register through software and you can’t pay through the software. Registering for a self-assessment tax return, and paying your final tax bill, must be done directly through HMRC.
There are plenty of options on the market today and when selecting the right software for you you need to consider your specific needs.
For example, as a sole trader, you might explore an accounting platform designed for small businesses such as Xero. However, if you only have a small business with few expenses and a small amount of income you might want to explore a simpler and more affordable option.
For landlords, having an industry-specific solution is important. Alongside your specific accounting needs, such as tracking income and expenses for each of your properties and reporting on specific tenancies and tracking rent payments there are also a range of property management functions you need. These include being able to store important compliance documentation such as your EPC, tenancy agreement, and gas and electrical safety certificates, manage and track current and historical tenancies, and track property maintenance.
Finally, you should make sure the software you choose is easy to use, and affordable.
Landlord Studio is designed by landlords for landlords. We’ve got over 45,000 properties currently managed on the system, and pricing starts at FREE.
Registering for a self-assessment tax return is fairly simple. All you need to do is register via the HMRC website in order to create an account. To create an account there are a few pieces of information you will need to hand, including:
Once you’ve created an account, you should receive a Unique Taxpayer Reference (UTR) number within 10 days via post (21 days if you’re abroad). After that, you’ll then receive an activation code for your account and you are ready to go. You then have everything you need in order to get started filling in your self-assessment tax return.
Just remember to keep this information somewhere safe - you will need it fairly frequently during your tax journey!
With your registration to HMRC complete, your Government Gateway ID and password, and your UTR number in hand, you are now ready to begin filling out your self-assessment tax return. However, to complete it, you’ll need a few more core pieces of data and information.
Unique Taxpayer Reference (UTR) number
When doing your tax return on the HMRC website, it's important to know that some jargon is unavoidable. For example, a key part of the tax return is the SA100 form. This stands for "Self-Assessment 100". It's an 8 page form that includes:
The SA100 form may seem official and daunting, but the HMRC’s system makes it relatively easy with simple check-boxes and short answer requirements. As long as you’ve prepped all the necessary information first it shouldn’t take that long.
However, HMRC can make things more complicated, and there may be other forms you need to fill out in addition to the SA100. For landlords these may include:
For self-employed or business owners these may include:
If you’re unsure which forms you need to complete consult with a licensed tax professional. You can learn more about the different tax returns on the HMRC website.
The last thing you want is to get to the end of the year, fill out your self-assessment ad then realise your tax bill is far higher than you expected and you can’t pay it.
As such, you should keep an accurate real-time record of your expected end-of-year tax bill throughout the year. There are several ways you can do this. Use a spreadsheet or you can use the HMRC’s self-employed income tax calculator.
In order to get an accurate tax bill estimate, you will need to have accurate and up-to-date data. The easiest way to do this is to use software like Landlord Studio to record your expenses in real-time using our time-saving automation tools like bank feeds and smart scan receipt, and then instantly generate an income and expense report when you need it.
Now that you understand what self-assessment is and how to submit it, it's time to discuss the least favourite part - paying it. Read on for details of the process and how to make it as easy as possible.
Paying is simple and can be done on the HMRC’s website. There are seven methods for paying depending on your preference:
Depending on the method you choose, you may need to wait up to five working days, so it’ is best not to leave it until the last minute.
The official tax return deadline is the 31st of January the following year.
However, the payment is actually split into 3 parts.
If your liability Is over £1000 then you will be required to make Payments on Account towards your next years tax liability. Your payment on account is calculated by using the last years liability - 50% of this liability is paid on the 31st January as Payment on Account 1.
This can be a bit confusing, so it’s always worth consulting with your accountant if you’re uncertain about what and when you need to pay. Generally speaking, it’s good practice to finalise your accounts, file, and pay your tax return as promptly as possible after the tax year ends in April.
It’s also important to note that though MTD will change the filing dates to quarterly the payment due date won’t be changing.
The HMRC is generally fair when it comes to paying. They are more interested in getting the money than they are in punishing you for not being able to afford it. As such, there are a number of options available.
However, if you do think you might not be able to pay you need to contact the HMRC as soon as possible to discuss these alternatives directly with them. If you are late with your payments you will be penalised with additional fees and interest rates.
You can find out more about your options if you cannot pay your self-assessment tax return bill here.
The current deadlines for filling in your self-assessment tax return are:
This will all change when Making Tax Digital comes into effect. Instead of one large end-of-year job, you will need to submit quarterly returns and an end-of-year statement. For landlords, this could mean multiple returns each quarter depending on the property class(es) you own (eg. furnished holiday lets, residential lets, foreign holiday lets). If you’re worried about this change we recommend consulting with your accountant.
At Landlord Studio we are dedicated to making this transition as easy as possible, with easy-to-use digital record-keeping tools and simple direct integration with the HMRC. Meaning as long as you keep your records up to date your submissions will be simple. Plus, with up-to-date records in Landlord Studio, you’ll have better financial oversight of your portfolio and overall cash flow.
There are, unfortunately, penalties for people that file their self-assessment late.
If your return is up to 3 months late, you may face a fee of up to £100. For self-assessments that are over 3 months late, and for any payments made late, the fine could be significantly larger.
If you have a valid reason for not filing your return, you may appeal any fine or penalty. However, it's important to note that the excuse must be valid, otherwise you will still be required to pay the penalty.
We've covered a lot of ground and we're almost there. If you've followed this article, you now know what self-assessment tax returns are, when you need to submit one, and how to fill it out.
But, what's next? Now that you are familiar with the process, there are a few other things to consider. Do you need an accountant? What are the benefits of using software? And what does the future hold for self-assessment tax returns? Let's take a quick look.
There isn’t a cut-and-dry response to this question, unfortunately. Whilst you don’t necessarily need an accountant, you may want one. Accountants can do more than just help with your tax return. They can offer financial advice, help with achieving long-term financial goals and mitigate future tax bills.
Generally speaking, as a landlord, you will want an accountant if:
Accountants can also help with education about new tax regulations, for example, the recent Section 24 changes which came into full effect in 2020.
Using software can be beneficial for your self-assessment tax returns, especially if:
Software, like Landlord Studio, can help you manage your rental property finances, plan for tax time and make the process of submitting your self-assessment simpler while simultaneously reducing the chance of mistakes.
The HMRC’s plans for MTD have been delayed, but they’re still coming. This marks the biggest change in recent history regarding how people manage their accounts and report their taxes and shows the HMRC’s commitment to bringing taxes into the modern day.
Rental accounting digitisation seems inevitable then. But this doesn’t have to be a bad thing. In fact, those that adopt the right systems early on will benefit massively. It’ll give them greater insight into their financials allowing them to spot discrepancies and mistakes in their accounts, identify potential weaknesses and areas that could be cut back, and ultimately save them time and money.
We talked to one customer who realised after using Landlord Studio for a few months, that one of his properties was only making £14 per month. With this information, he was able to make targeted business decisions to consolidate his assets and improve cash flow. Without this data at hand, he would never have known.
Landlord Studio is more than just a digital record-keeping tool though. It’s a full-service property management system that can help you streamline everything from property maintenance to compliance management. With Landlord Studio you can:
Landlord Studio is an affordable award-winning solution designed for landlords. And your first 3 properties are completely FREE.
Sign up today for free and see how we can help you turbocharge your property management and accounting.