Tax implications of letting out your property while travelling
If you rent out your property while you go travelling then you will be liable to pay income tax on that extra income. The damage is minimal once you factor in deductions, wear and tear allowance and any personal tax allowance…
The allowable deductions
- letting agent’s fees
- legal fees if your letting your property for less than one year, or for renewing a lease for less than fifty years
- accountant’s fees
- buildings and contents insurance
- interest on your mortgage
- any maintenance and repairs (but not improvements)
- utility bills (like gas, water, electricity)
- rent, service charges
- Council Tax
- cleaning or gardening type services
- any direct costs of letting the property, like phone calls or advertising
The other allowances
For furniture and equipment provided with a furnished residential letting (excluding UK furnished holiday lettings) you can claim a ‘wear and tear’ allowance. The allowance is 10 per cent of the ‘net rent’ (rent received less any costs you pay that a tenant would usually pay).
How to work out the tax
- add up all the rental income
- add up all your ‘allowable expenses’
- take your allowable expenses away from your income
- then deduct a ‘wear and tear’ allowance - based on a percentage of your rent
The resulting profit is then taxable as normal income. Don’t forget, you can earn up to the personal allowance (2007-2008 £5,225) free of tax!
If you are planning on leaving the country for more than 6 months then your letting agent/tenant should deduct income tax from your rent. The tax is worked out at the basic income tax rate on the net rental income.
The purpose of this post is NOT to give you tax advice, but to offer initial guidance. It is HIGHLY RECOMMENDED that you contact a tax professional and get detailed advice specific to your particular circumstances.
Income tax
Tax on rental income
Non resident landlord scheme
