One of the questions most frequently asked by landlords is, “do I have to pay tax on rent I receive?”, according to one leading letting agent.

Bob Urwin, of Oxford-based Martin & Co, said: “Letting residential property is treated as a single business, even if you let more than one property.

“If you let several, you can off-set the losses from one against the profits from another. You pay tax on any profit as part of your overall income. A landlord can deduct certain expenses and tax allowances from the rental income to arrive at the taxable profit or loss.

“If you have a number of UK residential lettings, pool the income and expenses.

“Holiday lettings and overseas lettings are worked out separately.”

Allowable expenses, according to Mr Urwin, include letting agents’ fees, accountants’ fees, buildings and contents insurance, interest on property loans, maintenance and repairs (but not improvements), utility bills, ground rent and service charges, council tax, cleaning, gardening and any other direct costs of letting the property such as phone calls and stationery.

If your annual income is less than £68,000, before deducting expenses, you include the total expenses on your tax return. If it is £68,000 or more, you will need to provide a breakdown.

Mr Urwin added: “There are different types of allowances. You can claim a capital allowance on the cost of necessary equipment, such as cleaning and gardening.

“You can also claim for equipment that isn’t for the use of a single let property, for instance a boiler that heats more than one property.

“For furniture and equipment provided for a residential letting, not holiday lettings, you can claim a ‘wear and tear’ allowance that is ten per cent of the net rent.”

Alternatively, Mr Urwin pointed out, you may claim a renewals allowance which covers the cost of replacing furniture or equipment.

“To work it out, take the cost of the replacement item and deduct the amount you sold the old one for, whether you received anything for it and anything extra you paid for a better one.

“But once you have chosen which of these two allowances to claim, you cannot switch between them from one year to the next year.”

For more information, contact Martin & Co on 01865 812110 or email oxford@martinco.com