Rental income tax help...

jonnosm

My girlfriend is currently renting out her house. However, the amount she receives is less than the amount of interest she is paying on her mortgage (It's only short term).

Should she still fill in a tax return, even though she's not making a profit?

Rolo_Tomasi

As she has a source of untaxed income she is still required to notify the Revenue of the amount received each year on a Tax Return - even if there is no tax due.

One of the benefits of doing this is that the losses are quantified each year and can be used to offset any rental profits generated in the future. Also think about the hassle involved when the property is sold if the Revenue then ask for details of annual income and expenditure since it was let out.

00ec25

legally she must notify her tax office of the fact that she receives rental income
in practice where the net profit is below £2,500 pa she will not be required to fill out a tax return, assuming she has a normal job under which she pays income tax via the PAYE system. The tax office will require her to state what is her profit so that they can then collect any tax due by adjusting her tax code under PAYE

if, as you say, she is genuinely making a loss because the interest element of the mortgage (not any capital repayment element) is > gross rental income, she cannot get a tax rebate, but must still declare the figure so that it can be carried forward to next year and may then be used to offset against any profits she may make in future years

jonnosm

Thanks for the help, much appreciated!