Tax on letting-am i right?

shamac

An in law has a flat he used to live in let out-which has been happening for about 10 years. He thinks that because he doesn't make a profit on it-ie the rent doesn't quite cover the mortgage (by about £50 a month) he doesn't have to tell the taxman. Am i right in thinking that he should have been filling in self assessments for the last 10 years-which he hasn't done-his other income is all included in the PAYE system? What will happen if he tells HMRC this ?

thanks

silvercar

Am i right in thinking that he should have been filling in self assessments for the last 10 years-which he hasn't done-his other income is all included in the PAYE system?

Yes.

What will happen if he tells HMRC this ?

They will tell him to fill in a tax return each year. If he has never made a profit, then there may not be any penalties. If the mortgage is repayment, then only the interest is alloweable as an expense so there may have been a profit.

Really is time to dig out the paperwork and declare the income. If he is really lucky he will be able to carry forward losses against future years profits.

whatatwit

You have mentioned that the rent does not quite cover the mortgage.

Your in -law is only entitled to claim the interest against the rent, not any capital repayments or endowment payments.
But, building insurance can be claimed.