2nd property rented, selling, tax help needed

[Deleted User]

Hi there, I have used the site previously and got some good advice (espec from dozergirl) and am hoping for a bit more.

My partner and I bought a but to let property (for 93'500) in Nov 2007 to renovate and then rent or sell. We spent around £17 k in buying costs, renovating and mortgage costs between then and the following sept. From oct 2008 to date we have rented the property out. making a profit each month of about £200 (rent minus interest only mortgage).

I have become thoroughly confused by various sources of information over a number of points and am hoping for some clarification.

1)should we have told hmrc about the purchase already and if so what are the implications of them not being told so far

2)should we have carried out a tax return for 2007-2008 even though we did not make any money (could we have carried over a loss and if so have we now missed the boat?) Again any implications ?

3)when we come to selling the property (maybe in about 18/24 months) can we include all the rennovation costs in our cgt allowances (i.e new windows, replacement wiring, central heating, fixtures and fittings etc)

4)finally when we complete a tax return for 2008-2009, do we do one each, and is it fairly easy either online or with a short form?

Sorry its such a long post but all help will be appreciated.

Debt_Free_Chick

rofey5 wrote: »

1)should we have told hmrc about the purchase already and if so what are the implications of them not being told so far

No - it was just an asset between the date of purchase and the date it was first let.

2)should we have carried out a tax return for 2007-2008 even though we did not make any money (could we have carried over a loss and if so have we now missed the boat?) Again any implications ?

No - as (1)

3)when we come to selling the property (maybe in about 18/24 months) can we include all the rennovation costs in our cgt allowances (i.e new windows, replacement wiring, central heating, fixtures and fittings etc)

Almost certainly yes, but let others comment

4)finally when we complete a tax return for 2008-2009, do we do one each, and is it fairly easy either online or with a short form?

If the property is jointly owned, yes. If owned by only one of you, then just the owner does the return.

silvercar

1) if the first time you rented it out was oct 2008 then the info will be included in your tax return for 2008-09, due at the revenue by jan 2010 if you file online. Provided your rent is under a certain figure you don't need to inform in advance.

2) not sure if costs on works carried out before renting can be included or not.

3) maintenance and repairs count against rental income and so reduce income tax. Improvements to the property count against capital gain. As a guideline anything that was there before is a repair or maintenance, anything nes is improvement. So installing a fitted kitchen for the first time is capital, replacing an existing kitchen is maintenance.

4) you do a form each, splitting all gains and costs between you. you can do it online.

[Deleted User]

thanks to both of you. that has cleared up a few things. The property is in joint names. In relation to the notification to r and c, the annual rental income will be about £5400 (2400 profit). can we put all the taxation concerns on the back burner until we do an online return in Nov or Dec 2009.

silvercar

This will help:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013376

If the annual rental income is under £15,000 you don't need to notify in advance.

tbs624

You'll find all the info you need here

In particular read PIM2500 on the beginning & end of a rental business.

If the property is furnished don't forget the 10% wear & tear allowance, in addition to things like advertising costs, gas safety certifs, LL insurances, professional fees such as LL association membership etc

You do not have to split the income 50/50; if the property is owned in unequal shares by a married couple/civil partners then both parties can notify their respective tax office that they wish the income/expenses to be allocated in accordance with that share.