2nd house questions

Knock-on

Hi there.

Question 1:

My Mother lives in Spain and owns her property outright.

She wishes to transfer ownership of the house to me and my Brother and continue to live there as before.

Basically, this is to avoid draconian inheritance laws in Spain.

Question is, even though my Brother and I will not receive any income from the property, will we have to declare it or pay any sort of tax?

Question 2:

My girlfriend owns a house in London but has recently moved into rented accomodation in Surrey. She has a Mortgage on the London property and with the rent from that and the rent paid on the new premesis, she is slightly worse off each month.

Will she also have to pay tax on the rent she receives on the London property and is there anything that can be done to offset it.

Thanks.

JimmyDeemo

In reply to question 2, i'm pretty sure that the income from the London property is taxable. I'm in a similar situation as i'm currently renting and have let out a property. She needs to inform the inland revenue that she is now a landlord and they will send the relevent paper work at the start of the next tax year. My cousin has advised me to get an accountant to sort out the tax, as his accountant usually make it so he only has to pay a small amount of tax. But of course you need to pay the accountant.

I'm sure others will be able to give you a more thorough answer, but i hope that helps.

Mutton_Geoff

She needs to inform the inland revenue that she is now a landlord

and they will send the relevent paper work at the start of the next tax year

No she doesn't need to inform the HMRC. All she needs to do is ask for an complete a tax return declaring additional income (rent) offset by costs (mortgage interest, depreciation, reasonable expenses, insurance, repairs etc) in a properly accounted manner and then pay the tax on any gain. (No tax refundable on any loss nor ability to offset against other income nor capital gain when selling the property).

Keeping proper records is essential.

JimmyDeemo

Hmmm sorry for false info. Guess i'm a little confused then. Thats what i did, phoned my tax office to find out what i needed to do. They said i've been registered and i would recieve the relevent documentation when i needed it. I thought they said April, but i could be wrong.

Knock-on

Mutton_Geoff wrote: »

She needs to inform the inland revenue that she is now a landlord

and they will send the relevent paper work at the start of the next tax year

No she doesn't need to inform the HMRC. All she needs to do is ask for an complete a tax return declaring additional income (rent) offset by costs (mortgage interest, depreciation, reasonable expenses, insurance, repairs etc) in a properly accounted manner and then pay the tax on any gain. (No tax refundable on any loss nor ability to offset against other income nor capital gain when selling the property).

Keeping proper records is essential.

Thanks for the advice mate. Very useful.

silvercar

JimmyDeemo, they may have registered you as needing to complete an annual tax return.

Mortgage interest is an allowable expense against rental income upto the value of the property when first let out. Any other expense incurred directly for the purpose of letting the property will also be an allowable expense.

poppysarah

Trust the tax office. They're the ones who should know.
(If it's in writing anyway!)

silvercar

KNock-on, in answer to your first question, if you have no income there is nothing to declare. When you come to sell the property there could wekk be a capital gains tax liability.

JimmyDeemo

silvercar wrote: »

JimmyDeemo, they may have registered you as needing to complete an annual tax return.

Mortgage interest is an allowable expense against rental income upto the value of the property when first let out. Any other expense incurred directly for the purpose of letting the property will also be an allowable expense.

So for example cost such as fixing radiators or other work on the property?
Well i guess i will give them another quick ring just to double check what i need to do.

silvercar

See here:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10014027

Knock-on

Thanks everyone for your help.

From the information given, I have been able to confirm the situation and have a clear idea about liability.

1. No liability unless it's sold or I start receiving rent.

2. Subtract Mortgage interest and other bills (service charge, legal expense) from rent and pay self assessment on difference. As it's under £15k, just need to provide an amount and not split it down.

Thanks again.