Many of our clients buy property with the view of letting it. In order to provide a full range of services, apart from conveyancing, we offer property management services including:
- Preparation of Tenancy Agreements
- Deposit collection and its placement in a government-backed tenancy deposit scheme
- Rent collection
- Tax payments from the collected rent
- Renovation/repairs arrangements
Below, we offer a summary of the letting process, basic risks and taxation associated with it:
Property letting process
To avoid any misunderstandings between a Landlord and a Tenant, you need to observe some legal formalities. Firsts of all, there has to be a Tenancy Agreement signed by the Landlord and the Tenant. Usually such agreements are concluded for one year with the possibility to terminate after 3-6 months. The Agreement includes information in relation to rent and deposit, rights and obligations of both parties to the Agreement, conflict-resolution arrangements.
The deposit usually amounts to 1 or 1,5 month’s rent. The Landlord is required to make sure that the deposit received is duly protected in accordance with government –backed tenancy deposit scheme.
Management Company & Family Lawyers
Some problems may arise during a tenancy, which could be resolved with the help of a Management Company or your family lawyer, especially when your Tenant fails to pay rent or does not fulfil some other obligations incorporated into the Tenancy Agreement. We, as Family Lawyers, often work with Management Companies in order to provide a full range of services and help to resolve issues on behalf of our clients who let their properties.
Basic risks associated with property letting
- Non-receipt of rent payment
- Lost or damaged property
- Difficulties in evicting tenants
Basis information about taxation for those who let properties
When you start letting your property, you will receive income and therefore, you will need to inform the tax authority (HMRC) about that. This can be done through a self-assessment tax return and can be submitted to HMRC once a year. It is possible to declare some expenditure in relation to the management of the let property as expenses. This would decrease the declared income and therefore, will reduce the amount of tax you will have to pay. For example, legal and accountant fees, letting agency fee, maintenance and repairs to the property, utility bills etc. are allowable expenses which can be deducted from the declared income. If you live abroad for six months or more every year, you are classed as a non-resident Landlord by the HMRC. If this is the case and you would like to pay your tax on income received from letting the property through self-assessment route, you will have to register at HMRC as a non-resident landlord. Following such a registration, your annual income from property letting will be taxed at 20%.