Financial responsibilities if you rent out a property

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Let your Mortgage Provider know

If the house started off as your residence but you’re no longer the one residing there, you may not qualify for the same mortgage terms as before depending on the period over which you’ll be renting out the property. You have to check with your mortgage provider first.

Income Tax

The profits from your rental income must be added to your other income sources for tax purposes since proceeds from rental property is considered income. You have to state how much income you’ve made from your rental property on the self-assessment form each year. As an owner of rental property, you may qualify for certain tax reliefs and you can also offset certain expenses from your rental income to lower your tax bill. This includes the maintenance costs and agents fees.

Capital Gains Tax

Usually, you have to pay capital gains tax on the profits from the sale of any property that isn’t your primary residence. If you make any changes that have an impact on property value such as changing windows, you can offset such expenses from the capital gains when you sell the property. It may take several years from the time you make these improvements to the time you sell the house so be sure to keep detailed records. After you sell, you can consult your financial advisor/accountant as to which expenses you can offset.

Register with a tenants deposit scheme

Tenancy deposit schemes are put in place to protect tenants’ deposits. In England and Wales, a landlord has to put the tenants’ deposits into a suitable scheme within 30 days of receiving it. Not adhering to this law could expose you to heavy penalties.

Landlords’ legal responsibilities:

According to the law, a landlord has a number of responsibilities that they must undertake:
1.      Landlords must draw up a legal tenancy agreement. A tenancy agreement isn’t enforceable unless it’s legal. Check with an attorney or with other landlords to see if you can get a sample agreement to guide you.
2.      Landlords must ensure that gas and electrical appliances that they supply are safe. This means that gas and electrical safety checks must be done regularly.
3.      If a landlord supplies any furnishings or furniture, they must ensure that these are not fire hazards.
4.      The landlord should also be able to provide tenants with an energy performance certificate so they can know about the property’s energy efficiency.
5.      Landlords must put their tenants’ deposits in a government backed tenancy deposit scheme.
6.      In England, a landlord must check whether potential tenants have the right to rent property.

Rent Smart Wales

This is a new scheme that has been introduced in Wales to ensure that agents, tenants and landlords are aware of their rights.
Landlords who want to manage their property on their own must first show that they’re fit and proper to be licensed. They must then pass the training or they can hire a licensed agent to manage in their place.

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