Agency Fees Tax Q&A

Agency Fees Tax Q&A

19:20 PM, 13th September 2023, About 9 months ago

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QUESTION

If a UK letting agent collects say £10,000 in rents from tenants and passes this onto landlords net of the agents 5% fees, what income does the agent need to declare to HMRC? Would it be the full £10,000 of rent collected or would it be his 5% agency fees only?

ANSWER FROM PROPERTY118 TAX TEAM

In the UK, letting agents are typically required to declare their income for tax purposes, and the income they need to declare to HMRC is the amount they receive as fees for their services. In this scenario, the letting agent collects £10,000 in rents from tenants but passes on the rents to landlords net of their 5% fees.

The income the agent needs to declare to HMRC is the 5% agency fee they earned from the total rent collected. So, in this case, they would need to declare £500 (which is 5% of £10,000) as their income.

The full £10,000 of rent collected does not count as the agent’s income because it is being passed on to the landlords as part of their service. The agent’s income is the fee they charge for facilitating the rental transactions.

FOLLOW UP QUESTION

So what if the agent doesn’t charge a fee?

ANSWER FROM PROPERTY118 TAX TEAM

If the letting agent does not charge any fee for their services and only collects rent on behalf of landlords, then they would not have any income to declare to HMRC from this specific transaction.

In such a case, the agent is essentially acting as a collection agent for the landlords, and their income would come from other sources, such as fees for additional services they may provide or from other business activities unrelated to rent collection. If they are not earning any fees or income from this particular transaction, they would not need to declare anything related to the rent collection to HMRC for tax purposes.

 

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