PLanning to Rent a Property - Help Required

FieyrP125

I'm thinking of moving back home and renting my property out to tide me over cash wise. I have a couple of questions. I am a new comer to all this, so please be patient with me!

1. I understand the deadline for online assessments is 31st Jan. So for example, April 07 - April 08 would have to be submitted by Jan 09? If I plan to start renting my home from 1st Jan 09 when would I submit my tax return? By the 31st Jan 2010? As this would cover April 08 - April 09? And I would only submit rental income from 1st Jan 09 - 1st April 09? Sorry to sound stupid - just need to understand it

2. Do I need to register as self employed? Found a site which states I need to register using the CWF1 form? Or do I just submit the return?

3. What happens when I move back into the property? Do I just stop filing the tax return? How will they know I have moved back?

4. I understand you can deduct expences, I also heard something that you are only taxed on the interest only amount of your mortgage? Can this be explained more please. I have a C&I mortgage - could I deduct the interest only element of this as a deduction to decrease my tax?

NOTE - I understand that I must inform my mortgage and insurance company

Many thanks guys from a 1st time poster

PasturesNew

1. For rent income in Jan 09, the figures would go onto your 08-09 tax return, due online by 31/01/10.

2. Just submit a return. It mentions in there "rent from property"; it's not self-employment (I'd have thought, although will stand corrected if wrong)

3. Yes, just stop entering rental income into your tax return. They won't know you've moved back.

4. Yes. An accountant is best for this, but, say the rent is £500 and the interest is £400, the basic income is therefore £100. From this, there is also some amount you can deduct for wear and tear, which is 10%; your petrol expenses if you travel to/from the property; property agent fees/tenant finder fees; buildings insurance. It is likely there's NO profit in it.

N79

PasturesNew wrote: »

From this, there is also some amount you can deduct for wear and tear, which is 10%; your petrol expenses if you travel to/from the property; property agent fees/tenant finder fees; buildings insurance. It is likely there's NO profit in it.

10% deduction is only for furnished properties and if you use it it restricts some of the other items you can claim for.

Petrol expenses can be difficult to back up - only claimable if you could prove that all the petrol claimed was used in persuit of the letting - it is v hard to do this.

As well as mortgage company and insurance company you have a host of other things to do (eg Gas Certificate, Deposit Protection etc). Just letting you know in case.

ncooper1974

N79 wrote: »

Petrol expenses can be difficult to back up - only claimable if you could prove that all the petrol claimed was used in persuit of the letting - it is v hard to do this.

Why is this so hard to prove? I live about 10 miles away from one of my properties. I've been up and down there about 3 times a week for the past 2 weeks getting ready for rental as the tenant moved out a few weeks back. What evidence will i need to show that I've actually been to the property? and are the petrol expenses purely the cost of petrol? of a mileage allowance?

N79

All I was saying was the HMRC can be a bit difficult over this. Did you visit the property solely for business or did you also go to the shop round the corner etc? I'm not denying that can claim it, just be ready for an argument if HMRC audit you. Keep a log of all journeys - you can not do more than that!

FieyrP125

Do you have to submit a return if you are making a loss?

Would you have to keep petrol receipts, etc? I know you have to keep any invoices and stuff for a certain number of years, but do they ever ask to see evidence of this?

Say I repaired the garage and it cost me £300 - would they want to see the evidence if you put this on your return?

N79

FieyrP125 wrote: »

Do you have to submit a return if you are making a loss?

Would you have to keep petrol receipts, etc? I know you have to keep any invoices and stuff for a certain number of years, but do they ever ask to see evidence of this?

Say I repaired the garage and it cost me £300 - would they want to see the evidence if you put this on your return?

1. Yes - and you can carry any loss over to offset against profit in the following year. (Pendants note: You can not make a loss, you sustain a loss).

2 and 3. You need to be able to back up all deductions on your tax return if HMRC come asking. So yes, if you claim 300 for a garage repair you will need receipts. You will not be able to claim for your labour. All invoices must be kept for 6 years from when you file the return as this is the length of time HMRC have to challange you.

FieyrP125

Just looked at registering for self assessment and it asks for a ' Unique Taxpayer Reference '

Where will this be found as I have never registered before?

Understand you need to keep the docs for 6 years, but from people's experience, do they ever ask to see evidence for small amounts?

N79

FieyrP125 wrote: »

Just looked at registering for self assessment and it asks for a ' Unique Taxpayer Reference '

Where will this be found as I have never registered before?

Understand you need to keep the docs for 6 years, but from people's experience, do they ever ask to see evidence for small amounts?

If they audit you then you will need to be able to prove every penny. If you can't then they will fine you and collect any tax owed. I have no idea what the odds are of actually being audited.

FieyrP125

So how do you go about submitting it online?

It needs a UTR and these are found on your tax return - but I have never submitted on before, so how do you go about it?

Sun_Lover

Also needed Energy Performance Certificate (EPC) before letting property.