When you rent out a property you will usually have certain things you must do to ensure you are on the right side of the law and tax man.
Legal requirements when renting out your own home
Tell your mortgage lender✔
You must tell your mortgage lender(if your home is mortgaged) when you rent out your own home as you may be in violation of your credit agreement with your mortgage lender when renting out your home . This is partly because the mortgage(especially the rate) they have given you does not account for the potential risk you expose them to when renting your property out. The mortgage lender also has a vested interest in your property due to the mortgage they have given you and must know what the property is being used for.
Your mortgage lender might increase the rate on your mortgage or move you over to a buy to let mortgage to account for the risk of renting your property out. This is because when you buy a property specifically to rent out you will need to get a buy to let mortgage.
What your mortgage lender decides to do will be based on how long the tenancy is, the rate you are currently on and their internal policy.
Draw up a tenancy agreement🔏
You must draw up a tenancy agreement between yourselves and the tenants. This is a legal requirement when renting your property out as it outlines your obligations to your tenant.
Tell your insurer🗝
You must inform your insurance provider when you rent your property out to ensure you have an adequate level of cover for your property. If you dont do this any damage which occurs to the property may not be covered under your current insurance.
Protect the tenants deposit🔏💲
If you take a deposit from your tenant then you must make sure this deposit is protected under a suitable scheme. You must also inform the tenants in regards to what they must do if there is a dispute about the deposit. By Law you must put the tenants deposit in a suitable scheme within 30 days of the start of the tenancy. You can read more on the tenants deposit schemes here.
Make sure gas appliances are safe and furniture complies with fire safety standards🛑
You will need to give prospective tenants an energy performance certificate which tells them how energy efficient your property is.
You will also need to make sure your furniture and fittings meet the fire standards.
You must check your tenants have the right to legally rent a property if it is in England👀
You do have some responsibility to check that your tenants have the right to rent in the UK. This check will need to be carried out on every person who is over 18 and intends to live in the property even if they are not in the tenenay agreement. You can read more about this here.
Tell HMRC about rental income🏚💸
You will need to keep all evidence of income and expenses you receive from renting out your property so that you can pay the right tax which is due to HMRC. You will likely have to pay income tax and capital gains tax depending on your rental activity.
Income tax as a landlord😮
At the end of the tax year you have to file your income tax. This will include any income made from rental properties. You can subtract any costs such as letting agent fees, maintenance fees, mortgage interest payments(if you are on a buy to let mortgage). You can find more detailed guidance on rental income tax on HMRC’s website
Capital gains tax as a landlord📈
You might be due capital gains tax if you sell a property that isn't your main home. You will be able to offset costs which are incurred on the property to increase its value from the income you report to HMRC. You should check with your accountant in regards to this and any other tax reliefs you may be able to claim to reduce your capital gains tax liability.
The rent smart walsh scheme👀
In wales a new scheme known as the Rent smart wales schemes has been introduced so tenants, landlords and agents know their rights and responsibilities when dealing with each other.
A landlord must now pass a test to ensure he is capable of managing his own rental property. If the landlord is able to do this they will be given a license which shows their qualifications.