Property income

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Property income
  • Outline
  • Income tax
  • Property allowance
  • Corporation tax

Outline

For income tax purposes, all rental income from UK property is pooled and taxed as a ‘UK property business’ under the provisions of ITTOIA 2005, Part 3. For corporation tax purposes, all rental income from UK property is similarly grouped and taxed together under the provisions of CTA 2009, Part 4.

Income from overseas property is pooled separately from the UK property business. See the Overseas property businesses guidance note.

The UK property business includes UK property income from furnished holiday lets (FHLs). Qualifying FHLs have beneficial treatment for tax purposes and therefore profits and losses of FHLs must be calculated separately from non-FHL property. This is explained further in the Furnished holiday lets guidance note.

ITTOIA 2005, s 327; CTA 2009, s 269

Although differences have evolved between the income tax and corporation tax rules, the way in which taxable UK rental income profits have been calculated under the separate codes are fundamentally the same.

From 2017/18 onwards, the simplified cash basis applies as the default method of calculation for most unincorporated property businesses (so long as the gross property income does not exceed £150,000). However, the business owner can make an election to opt out if he would prefer to calculate the profits under the accruals basis. See the Simplified cash basis for property businesses guidance note.

For non-cash basis businesses, the accruals basis must continue to be used to calculate the property income, see the Accruals basis guidance note.

Income tax

It is relevant to first deal with the question of what income is included within the definition of a UK property business.

More on Taxation of property income: