Taxing on rental income?

LionKing

Hi,

I am considering whether to fill a self assesment tax return. I have never filled one in before. I am employed (PAYE)

I currently have 2 residential mortgages however i am receiving money for my second flat (let to a family memeber during week - i use at weekends). I understand i need to declare this additional income on my tax return. Will i get in trouble from tax man for letting a residential mortgage?

I have been advised to do a tax return, as my outgoings on the second flat are significantly more than the rental income. Therefore you can claim more than what you owe.

Regarding tax on rental property, are you taxed 22% of rental income however have allowance for 22% of property costs (including mortgage payments).

Thanks

pmshrink

hi you have to fill in a tax return in this situation, or youre acting illegally. taxman won t care about the residential mortgage thing, but mortgage company will - you probably need to clarify if your relative is a tenant or not, and then let mortgage company know that the place is let. you can use tax calc or similar to fill in tax return, which makes it really easy, and if your turnover for the flat is less than 15k you can send in a simple account, ie turnover, expenses ( without detailing what they are) and profit or loss. youre aalowed to claim 10% of the rent as "wear and tear" which is also deducted from your profit or added to your loss. good luck! any questions, phone the tax office, theyre really helpful. get it there before the deadline!

Bordera

LionKing wrote:

Hi,

I am considering whether to fill a self assesment tax return. I have never filled one in before. I am employed (PAYE)

I currently have 2 residential mortgages however i am receiving money for my second flat (let to a family memeber during week - i use at weekends). I understand i need to declare this additional income on my tax return. Will i get in trouble from tax man for letting a residential mortgage?

I have been advised to do a tax return, as my outgoings on the second flat are significantly more than the rental income. Therefore you can claim more than what you owe.

Regarding tax on rental property, are you taxed 22% of rental income however have allowance for 22% of property costs (including mortgage payments).

Thanks

Hi LionKing.

You let the property to a family member during the week and use it yourself at weekends. Does the family member pay you a "commercial" rent? That is the same sort of rent you could get if you let the flat on the open market? Or do they pay you something towards the expenses?

HMRC will not be interested in the type of mortgage you have, but your mortgage provider may be.

You are taxed on rental profit at whatever your marginal rate is, So for instance if the income you already has takes you into the 40% tax band then you would pay 40% on the rents less allowable expenses. Don't forget that if your income is just below the 40% band then your rental profits might be enough to take you into it.

As you use the flat yourself only some of the expenses and mortgage will qualify for relief, as some of it will be for your personal use at the weekends.

You cannot usually use the losses from renting a property to reduce the tax on your other income. It gets carried forward and used to reduce any taxable profit you may make from renting the property in the future.

Phoning the tax office to get their advice would probably be a good idea.