If you receive rental income from a residential property or accommodation that you own, this income will be subject to tax under the category of income tax. The ins and outs of rental income tax are laid out below.

What property is considered rental property?

Any residential property that is rented out in exchange for a monthly amount is considered rental property. This can include holiday homes, guesthouses, a cottage or granny flat, B&Bs, full homes and other such properties.

What tax do I pay for rental income?

Rental income is added to any other forms of income you receive. In essence, rental income will simply increase your taxable earnings within the tax year. There are, however, certain costs that will decrease the taxable rental income. Examples of some permissible expenses that are allowed to be deducted from rental income are rates, bond interest, estate agents and fees, insurance, garden services, security, electricity, domestic services (should the landlord pay for these) and repairs. Any cost that is paid for by the landlord and directly relates to the rental property is permissible to be deducted from rental income tax.

Expenses that are not permissible include improvements. Where repairs are essential and necessary to restore something to its original and working condition, improvements to build or create an improved asset are not permissible to deduct from rental property income tax but rather forms part of capital gains tax when the property is sold. 

Need some help with your rental property income tax?

If you have any questions, need help understanding the ins and outs of tax, or are looking to have someone else handle your taxes entirely, contact us at info@smithandrossi.com, via our website, or on social media.