Why does tax have to be so taxing!

talltony_uk

OK so this may seem straightforward to some but im struggling here...

Bought a flat 8 months ago with the idea of renovating to sell on... but 3 months after finishing the market started to slide big time so I thought I would rent it.

So have 12K or legal and renovation costs. On top of that insurance, mortgage to repay and maintenance charges.

Income from property 475 per month
minus the above cost= 180 per month profit

It does not seem like much but this was never my intention to rent it. I have phoned tax enquiries when I got the place, I have phoned local tax office explained this to them in detail but never ever received anything in the post. I have also been bounced around on calls all over the place, someone even suggesting that they could take money from my day job through my PAYE???

Please help don't want to get stung here with a fine.

Thanks,

CLAPTON

you need to register the self employment within three months
you need to start paying class 2 NI contributions by DD

you need to do some research as to what can be offset against your rental income
costs like legal (buying) and renovation can't be set against rental income; they can be set against CGT when you come to sell.

you can offset, advertising, interest payment on the mortgage (not capital), insurance, if its furnished then you can offset 10% against ware and tear..

talltony_uk

Thanks - so probably best to speak to my local tax office... and just to clarify I still have to register as self employed even though I already work full time for an employer?

I have all the renovation receipts and bills stashed separately as I thought I might be able to offset this against CGT when I sold.

Elaine_Wilson

I think you need to clarify if you are self employed. You said that you bought the property with the intention of renovation and resale. Have you told HMRC this? If so, they should have told you to register as self employed and started you paying national insurance (or claiming exemption). If you are trading your profit would be subject to income tax.

I'm not suggesting you lie but it would probably be beneficial for this venture to be treated as an investment so any gain will be subject to CGT.

talltony_uk

I can tell you now... I most definitely am employed in a 9-5 role and this is exactly what I told the tax office along with my intentions of the property. But no letters, no tax adjustment to my PAYE. It pains me to keep contacting them for a straightforward reply, I'm worried about touching any of the money and it along with any maintenance work that has to be paid out is sitting in a separate account with a big fat ? over it.

I'm going to call them now.

talltony_uk

Interesting they say... that I am registered for self assessment tax returns.. BUT, they have not sent out the forms yet?!? remember I told them about this over 6 months ago! Worrying because I would have already missed the paper standard tax return date by then! Lets hope they don't send me the forms on December the 24th.

Merlin_Accounts

Hi

Just need to make a correction to one or two responses to your initial query.

Letting of property is not self employment and you do not have to register as self employed. You are obliged to notify the tax office of your new income source, which it seems you have done. If you only started getting rent this tax year (since 6 Apl) that is why you have not had a return - you will get one next spring.

As you are NOT self employed you also do not have to pay Class 2 National Insurance (what people often refer to as the weekly stamp).