How do I report property income to HMRC?

Reporting property income to HMRC is something many landlords dread, often because they are unsure what counts as rental income, what expenses can be claimed, whether they need to register for Self Assessment or how to declare everything correctly. In my opinion reporting property income is far easier when you understand the rules early and follow a clear process. The key is knowing which type of landlord you are, which forms you need, what income must be declared and how to calculate the right figures without triggering HMRC enquiries.

This guide explains how to report property income to HMRC step by step. I cover what counts as rental income, how to calculate taxable profit, how the new digital rules affect landlords, when you must register for Self Assessment, what forms to use, deadlines, allowable expenses, cash basis rules, record keeping and the most common mistakes people make. By the end you will feel confident reporting your property income correctly and avoiding unexpected penalties.

First: who must report property income to HMRC?

You must report property income if you:

• Earn rental income from a buy to let

• Rent out a room in your home

• Receive Airbnb or holiday let income

• Receive overseas rental income

• Rent out a garage, driveway or storage space

• Rent out a second home

• Let out part of your own home (lodger or house share)

• Receive insurance payouts connected to rental income

• Are a joint owner receiving rental profits

HMRC expects you to report property income even if you did not make a profit. Tax is based on rental profits, not simply rental receipts.

In my opinion many accidental landlords forget to report income because they assume small or casual letting does not count. HMRC treats all rental income as taxable unless an exemption applies.

Step 1: Work out whether you need to register for Self Assessment

You must register for Self Assessment if:

• Your rental profit is more than £1,000 a year

• You want to claim expenses above the £1,000 property allowance

• You own a buy to let

• You receive overseas rental income

• You receive income from a holiday let

• You are a higher rate taxpayer with rental profits

• HMRC asks you to file a return

The £1,000 property allowance

If your total rental income is £1,000 or less in a tax year, you do not need to report it. If it is higher, you must register unless you use the allowance as an alternative to claiming expenses.

Registering for Self Assessment

You must register by 5 October following the end of the tax year. If you delay, HMRC may charge penalties.

In my opinion most landlords should register even with modest rental income because using allowable expenses often saves more tax than using the £1,000 allowance.

Step 2: Keep proper records throughout the year

HMRC expects accurate records of:

• Rent received

• Dates rent was received

• Deposits received and returned

• Letting agent statements

• Mortgage interest (restricted by current tax rules)

• Allowable expenses

• Repairs

• Property improvements

• Service charge statements

• Insurance

• Replacement of domestic items

• Mileage if you travel for property management

• Invoices and receipts

• Overseas property documents if applicable

You must keep these for at least six years.

In my opinion many HMRC enquiries occur because landlords cannot provide evidence of their expenses. Good records are essential.

Step 3: Understand what counts as property income

Rental income includes:

• Rent paid by tenants

• Airbnb or holiday let fees

• Licencing fees

• Storage or garage rents

• Service charges you pass to tenants

• Payments from tenants for utilities if you pay the bills

• Insurance payouts for loss of rent

• Deposits you keep

• Rent paid by a local authority

Special case: Airbnb and short term lets

These must also be declared as property income unless your property qualifies as a Furnished Holiday Let under strict rules.

Step 4: Calculate your allowable expenses

You can deduct allowable expenses before calculating taxable profit.

Allowable expenses include:

• Letting agent fees

• Accountant fees

• Repairs and maintenance

• Buildings and contents insurance

• Service charges

• Utilities you pay for tenants

• Replacement of domestic items

• Advertising costs

• Phone, travel and mileage for property duties

• Ground rent

• Council tax if you pay it

• Cleaning and laundry costs for furnished lets

Not allowable

These are common mistakes:

• Capital improvements

• Your own labour

• Mortgage repayments (only the interest is considered)

• Personal expenses

• Furniture purchased for the first time

In my opinion many landlords confuse repairs and improvements. Repairs restore the property. Improvements increase its value. Improvements must be treated as capital and are not deductible against rental income.

Step 5: Understand the mortgage interest restriction

You can no longer deduct mortgage interest as an expense for standard rental properties. Instead you receive a 20 percent tax credit.

Example

Mortgage interest: £8,000
You receive a 20 percent credit = £1,600 off your tax bill.

This rule does not apply to Furnished Holiday Lets. They can still deduct mortgage interest in full.

Step 6: Choose between the cash basis and the accruals basis

Most individual landlords must use the cash basis, which is simpler.

Cash basis

You record income when it is received and expenses when they are paid.

Accruals basis

You record income when earned and expenses when incurred even if not paid.

You can choose accruals if it better reflects your circumstances.

In my opinion the cash basis suits most small landlords because it reduces complexity.

Step 7: Report rental income in your Self Assessment tax return

Once registered for Self Assessment you will complete the SA105 Property Pages.

You must include:

• Rental income

• Allowable expenses

• Income from overseas properties

• Holiday let income

• Reductions for private use

• Mortgage interest tax credit

• Replacement of domestic items

• Joint ownership details

• Losses carried forward

Joint property

You must declare your share of rental income and expenses based on your beneficial ownership, not how you choose to split income unless a Form 17 declaration is made.

Deadlines

• Online return: 31 January

• Tax due: 31 January

• Payments on account may apply

• Penalties apply for late submission

In my opinion using accounting or landlord software makes this process much easier.

Step 8: Special rules for Furnished Holiday Lets (FHL)

If your property qualifies as an FHL you must report income but you also benefit from:

• Full mortgage interest deduction

• Capital allowances

• Eligibility for business asset disposal relief

• Ability to make pension contributions using FHL profits

To qualify:

• Property must be available for let 210 days

• Must be actually let for 105 days

• Must be furnished

• Lets longer than 31 days must be limited

FHL income must be reported using the property pages.

Step 9: How to report overseas property income

You must report overseas rental income in Self Assessment even if you pay tax in that country.

The UK offers foreign tax credit relief so you do not pay tax twice.

You must:

• Convert all income to GBP

• Convert all expenses to GBP

• Keep records of foreign taxes paid

• Report gains if you sell the property

In my opinion overseas rental income is a major trigger for HMRC enquiries, so accuracy is vital.

Step 10: Reporting losses

If your rental expenses are greater than your income, you make a rental loss.

Rental losses:

• Can be carried forward

• Can only offset future rental profits

• Cannot reduce other income (except for FHLs or special cases)

Reporting losses ensures you reduce tax in future years.

Step 11: What if you have not reported property income before?

If you have missed declaring property income for previous years you can use:

The HMRC Let Property Campaign

This allows landlords to disclose unpaid tax voluntarily. HMRC usually offers:

• Reduced penalties

• Lower interest

• A faster resolution

In my opinion the Let Property Campaign is one of the most supportive compliance programs HMRC offers and is far better than waiting to be caught.

Types of property income enquiries HMRC commonly opens

HMRC uses data from:

• Airbnb and booking platforms

• Letting agents

• Council licensing schemes

• Land Registry

• Deposit protection schemes

• Foreign tax authorities

• Mortgage lenders

Common triggers include:

• Undeclared Airbnb income

• Large fluctuations in rental income

• High repair expenses

• Overseas properties not declared

• Rental properties listed on public platforms with no tax return filed

In my opinion HMRC’s data matching for landlords is now extremely sophisticated.

Real world examples

Example 1: Reporting a basic buy to let

Sarah earns £10,500 in rent and has £3,400 of expenses. She submits SA105, reports taxable profit of £7,100 and receives a mortgage interest credit worth £900. Her tax bill is calculated based on this figure.

Example 2: Airbnb income undisclosed

Tom rents a spare room for £4,500. He mistakenly thought the rent a room scheme applied automatically. He submits an SA105 with the correct election and is exempt up to £7,500.

Example 3: Overseas rental income

Amira owns a property in Spain. She receives €8,000 rent. She converts it to GBP, deducts local expenses and claims foreign tax credit relief.

Example 4: Let Property Campaign

Mark forgot to report rental income for three years. He uses the Let Property Campaign, discloses everything and avoids higher penalties.

In my opinion: the key things landlords must remember

If I had to summarise this topic in a few essential points:

1. You must report rental income if your profits exceed £1,000.

2. Self Assessment is the main method for reporting property profits.

3. Keep excellent records because HMRC often checks property income.

4. Allowable expenses reduce your tax bill significantly.

5. The mortgage interest tax credit is now standard for most landlords.

6. FHLs have their own special rules.

7. Overseas property income must be declared.

8. Use the Let Property Campaign if you have undeclared past income.

In my opinion the biggest mistake landlords make is delaying registration or assuming income is too small to matter. HMRC’s property data matching is extremely advanced and early reporting always leads to the best outcome.

Final thoughts

Reporting property income to HMRC is straightforward once you understand the rules. You must register for Self Assessment if your rental profits exceed £1,000, keep good records, calculate your allowable expenses, apply the correct treatment for mortgage interest and complete the SA105 property pages accurately. Whether your income comes from a buy to let, Airbnb, a room in your home or an overseas property, HMRC requires full disclosure. With proper planning and accurate reporting you can stay compliant, reduce your tax bill and avoid HMRC enquiries.

In my opinion the best approach is to stay organised throughout the year and seek professional advice if anything is unclear, particularly when dealing with overseas properties or complex expense claims.