The taxman cometh.

Just like off-duty policemen always look like on-duty policemen, the taxman is the embodiment of the job it is his lot to perform.

And here he is looking at your buy-to-rent property.

The market has done well for you. And he wants his slice of the pie. He wants a big slice, too – a big greedy slice when you consider what he wants to take off you and yours in that inheritance tax when you die.

But what are the rules on buy-to-let tax? You need to be aware so you can play the game and not fall foul of the taxman and the law. (Tip: The trick with the taxman is to operate unnoticed – once noticed, you are a suspect.)

So here are the tax rules:

Tax

Monies taken in rent are subject to income tax. Look up what the Government allows you to keep for yourself at http://www.hmrc.gov.uk/rates/it.htm.

Tax will be charged at your highest marginal rate of income tax - either 22 per cent or 40 per cent.

But if you rent out a room in your property the taxman will allow you to pull in £4,250 of rental income a year tax-free. You still have to declare this.

That is the downside. The upsides are expenses, allowances the taxman takes into account.

Expenses

You take the rental income and knock off the following costs:

1. Interest payments on your buy-to-let mortgage. But not capital repayments.

2. Mortgage arrangement costs.

3. Maintenance costs - painting and decorating. Your buy-to-let property is an investment, a business and you are allowed to keep it looking marketable.

4. Furniture. You can claim £10% a year depreciation on furniture value. Try not to claim for wear and tear to your ex-local authority studio flat’s Chippendale dining room set and handmade bed with antique posts - the taxman will consider your claim, consider your studio flat and consider you are being economical with the actualité. You will stand out. And, as we say, you do not want to stand out.

5. Cleaning. You can keep your home clean with a cleaner and cleaning products. Cleanliness is next to godliness, and it will keep environmental health from shutting down your business.

6. Ground rent, service charges and buildings insurance. Service charge can be a massive in parts of central London, running into thousands of pounds.

7. Advertising the property. You can advertise your place in the local press, on websites and via other media. If, however, you advertise your contemporary flat in the side of a Boeing 747 or Arsenal’s home kit the taxman will think you odd and suspicious. Do not be noticed. Never be noticed.

8. Letting agent’s fees. The taxman allows you deduct the money paid to that nice man in the pink shirt.

9. Accountant’s fees. Your property is a business. The accountant is an instrument of business. His bill can come off your tax bill.

10. Insurance policies on white goods. These things – fridge, cookers, washing machines, driers (but, no, not the white Jacuzzi and white 48inch telly) – need to be maintained. And looking after gas boilers is also deductible.

The taxman wants to encourage landlords to keep such vital things in good working order. Sure, you have to pay a plumber an exorbitant fee to see to the heating system but at least you can knock off 22% or 40% (your tax burden) from his bill.

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