AITI Chartered Tax Adviser

How is tax on rental income calculated?

Rental income is taxed under Schedule D Case V.
A landlord is liable to income tax on the aggregate of the surpluses and deficiencies from all of his properties. The surplus (or deficiency) for each property is calculated by deducting from the gross rent receivable:

(a) Rent payable in respect of the property. This would apply if you are subletting.
(b) Rates.
(c) Expenses which you are obliged to incur under the letting agreement.
(d) Non-capital maintenance, repairs, insurance and management expenses.
(e) Interest on money borrowed to acquire, improve or repair the property. You must be registered with the Residential Tenancies Board to claim this relief.
(f) The cost of constructing, converting or refurbishing a residential property (qualifying premises) in a renewal incentive area. This type of tax relief has come to be known as “section 23 relief”, as it was first introduced (for construction expenditure) by section 23 of the Finance Act 1981.