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Tax for landlords on rental income

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Landlords: All you need to know about tax on your rental property

As a landlord in Ireland, it's important to understand the tax implications of your rental income. Here are some things to watch out for on your Irish tax return.

Tax for landlords on rental income

In this article, we will cover the basics of income tax as it relates to rental properties.
 
If you are a landlord, you have to consider the tax implications of letting property.
 
We will be focus on the income tax implications for landlords. More specifically, how you calculate the taxable profit, how much tax you’ll pay, and when.
 
 

Paying tax on rental income

An individual must assess their tax position each year under self-assessment. The tax year in Ireland runs from 01 January to 31 December – i.e. the calendar year matches the tax year in Ireland. 
 
Landlords receiving rental payments from tenants will need to assess their income tax position and reporting requirements with Revenue in the form of a tax return.
 
If you let out a room in your main home, and live alongside your tenant, rent-a-room relief can be claimed on a tax return. This allows an individual to earn up to €14,000 per tax year ‘tax free’. Aside from this relief however, you must calculate and pay income tax if a rental profit is made. 
 
An individual that moves abroad and lets out their Irish residential property will need to consider additional tax reporting requirements. A non-resident status will require either the tenant withholding a portion of the rental income and remitting it to Revenue, or otherwise you appoint a collection agent in the state to manage your rental income. Often a collection agent is appointed. 
 
 

How is tax calculated on rental income?

1.  Income

When a landlord receives a payment from the letting of a property, they will need to consider whether this is assessable as gross income for income tax purposes.

The following types of payments will be classified as income:
 
  • rent payments, this could be weekly, monthly or yearly
  • reimbursement of expenditure incurred, such as utility bills, repairs or cleaning costs
  • non-refundable deposits
  • money kept from refundable deposits
In many cases you are taxable on the sum you are entitled to receive under a lease agreement. 
 
2. Allowable expenditure
 
Once rental income for the period has been established, an assessment of allowable expenditure must be undertaken.
 
Expenditure incurred wholly and exclusively for the purpose of the rental property, which is not capital in nature, can be deducted against rental income. Capital means expenditure that enhances and improves the value of the property. 
 
The following types of expenditure can be deducted against rental income:
 
  • Letting agent and professional fees
  • Legal fees on lets of a year or less
  • Accountancy fees incurring in relation to the letting business
  • Costs of maintenance and repair work 
  • Utility bills, such as, gas, electricity etc.
  • Insurance, such as building and contents
  • Rent, ground rent and service charges
  • Advertising costs for new tenants
  • Services such as cleaning or gardening
  • Stationery, postage costs and telephone costs
  • Costs of replacing domestic items
 
Some landlords may incur finance costs, such as mortgage interest. This is also an allowable expense. It is worth noting that it is the interest element of the mortgage payment which is allowable, the capital element is not deductible. 
 
You can also deduct a wear and tear allowance, for furniture or white goods purchased for the property. This wear and tear allowance is allowed over 8 years at a rate of 12.5%. 
 
Once you have collated your income and expenditure, you can deduct the total allowable expenditure from the rental income, in order to calculate your taxable profit arising for the year.
 
 

How much tax do you have to pay on rental income?

Your rental profit is subject to tax at your marginal rate of income tax. This means it is added to your other taxable income which arises in the tax year. 
 
PRSI and Universal Social Charge may also apply depending on your personal circumstances. 
 
 

Rental income tax on multiple property lettings

If you own multiple properties, you calculate your rental profit on a property-by-property basis, and then you will need to consolidate your income and expenditure to calculate your taxable profit arising for a tax year.
 
Individuals owning property in both the Ireland and overseas will need to keep these income and expenditure streams separate. Effectively you need to treat this as two separate rental businesses for income tax purposes. Further, these profits will be reported separately on your self-assessment tax return.
 
From a practical perspective, landlords should ideally be keeping their rental finances separate from their personal expenditure. This will certainly aid with reporting and delivery of information if an accountant is dealing with your affairs.
 
 

How to pay income tax

Landlords are required to pay income tax through self-assessment in most cases, via Revenue’s ROS system.
 
Landlords who receive Irish rental income but live outside the state may have tax withheld at source by their letting agent or tenant. The rent is still taxable in the Ireland and Revenue will still require a self-assessment tax return to be submitted.
 
For a tax return to be issued, an individual will need to register for self-assessment on ROS.
 
 

When do you pay income tax?

Where a liability has arisen an individual will need to pay the outstanding tax by 31 October following the end of the tax year. This deadline is often extended by approximately 2 weeks to allow for electronic filing of tax returns. 
 
 

Declaring losses

If your allowable expenditure is more than your rental income in a tax year, a loss for your property business will arise. These losses will be carried forward and offset against future profits you make on your rental business.
 
 

Taxes on selling properties

 
When selling property, you will need to assess whether capital gains tax (CGT) is payable. This is especially necessary for disposals of properties that are buy-to-lets, i.e not your main home.
 
Individuals selling UK residential properties will need to be aware of the additional reporting requirements set out by HMRC.
 
 

Frequently Asked Questions

Landlords need to register each of their tenancies with the Residential Tenancies Board (RTB) every year. This must be completed within one month of the anniversary when the tenancy began.

Yes, if you rent out a property you need to file a Tax Return each year and you will pay income tax on the difference between the rents you have charged in a tax year, less any allowable expenses and charges.

Yes, if you make money from renting with Airbnb you need to file a Tax Return. Also, where an Airbnb host generates income of €40,000 per annum they must register for and charge VAT at the appropriate rate and file the appropriate VAT Returns. 

If you are an Irish resident, any rental income earned on an overseas property will also be subject to the Irish tax regime. You will be able to claim deductions to reduce your rental profit in the same manner as you would for your Irish property.

No, Local Property Tax (LPT) cannot be claimed as a deduction from your rental profit.

You need to make a Tax Return on your investment property regardless of whether it is profit or loss making. However, you should know that if you make a loss in one year this loss can be carried forward to reduce any future rental profits hence lowering your tax bill.

You may be able to reduce your taxable profit by claiming rental expenses incurred such as mortgage interest, repairs and maintenance, insurance and accountancy fees.

Capital allowances are an annual allowance for expenses incurred on capital items. An example of a capital item would be if you purchase a new boiler. Because this is considered a capital item for the property, the cost of this will be allowed over eight years.

From 2018 a new deduction of up to €5,000 per property for pre-letting expenses of a revenue nature are allowable subject to the property being vacant for a period of 12 months or more.

As part of Budget 2024 the Minister introduced a new landlord tax relief for the years 2024 to 2027. For these years, tax relief at the standard rate of tax will apply to a certain amount of rental income. Find out more

NLWT stands for Non-Resident Landlord Withholding Tax. The new NLWT system enables tenants or collection agents to make Rental Notifications (RN) when making payments to a non-resident landlord. 

Date published 11 May 2023 | Last updated 21 Aug 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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