Bought a caravan - do I declare extra income?

tiggy61

My partner and I recently bought a static caravan in a park and would like to let it out for a few weeks a year to help with the site fees and bills. I know the law on Furnished Holiday Lets has just changed and makes it harder to register such a venture as a business and claim tax relief, but we weren't planning to do that anyway. As I said, all we want to do is cover our costs (of about £3000 - £4000 per year) by taking some bookings. My question is, do I have to declare this income on my tax return or is there some sort of limit that applies?

fengirl_2

If you have other income, then you need to declare this income. If you make a loss, you can carry it forward to the next year.

dylanuk

Legally you have to declare all income and pay income tax.

Some people don't because they get paid cash, which while it's technically illegal is also accepted as one of those things that's just going to happen.

However, all that said, if you're just planning on getting enough bookings to cover your expenses you shouldn't have to pay any income tax because you can off-set your income against your caravan expenses.

So if you're paying out £4000 in running costs over a year, and you take £4000 from letting it out - then you've effectively earned 0 so you don't have to pay any income tax.

Remember the cost of the caravan purchase will also be a tax deductible expense, but it will be an asset (a lasting expense), which means you off-set a percentage of the cost each year. For example, if it cost £8,000 - your first year expenses would be your running costs plus 10% of £8,000... then in your second year you can claim another 10% of £8,000 as expenses. (These numbers are examples and not real!).

Assets depreciate in value too, so you eventually get to a point where you can't claim a percentage of the cost of the caravan as expenses anymore.

If you have no other income, the income from your caravan will use up your tax allowance (I think it's about £6000 a year). So you can earn up to £6,000 a year tax free (but this is your total income from everything).

vaporate

dylanuk wrote: »

Legally you have to declare all income and pay income tax.

Some people don't because they get paid cash, which while it's technically illegal is also accepted as one of those things that's just going to happen.

However, all that said, if you're just planning on getting enough bookings to cover your expenses you shouldn't have to pay any income tax because you can off-set your income against your caravan expenses.

So if you're paying out £4000 in running costs over a year, and you take £4000 from letting it out - then you've effectively earned 0 so you don't have to pay any income tax.

Remember the cost of the caravan purchase will also be a tax deductible expense, but it will be an asset (a lasting expense), which means you off-set a percentage of the cost each year. For example, if it cost £8,000 - your first year expenses would be your running costs plus 10% of £8,000... then in your second year you can claim another 10% of £8,000 as expenses. (These numbers are examples and not real!).

Assets depreciate in value too, so you eventually get to a point where you can't claim a percentage of the cost of the caravan as expenses anymore.

If you have no other income, the income from your caravan will use up your tax allowance (I think it's about £6000 a year). So you can earn up to £6,000 a year tax free (but this is your total income from everything).

It's only illegal because the governemnt is not making money out of it...

RayWolfe

dylanuk wrote: »

So if you're paying out £4000 in running costs over a year, and you take £4000 from letting it out - then you've effectively earned 0 so you don't have to pay any income tax.

Hardly! You are suggesting no private use. Reread the original post.

tiggy61

OK, so let's say I get £2000 from bookings, but it costs me £4000 in site fees and bills. I know that if I register it as a business then I can do the sums, record it as a loss, depreciate the value of it, etc. BUT if I don't register it as a business what happens? On my tax return I say I made £2000 extra income from the bookings but whereabouts on my tax form do I say that this isn't really income because it cost me more than that in the first place and I'm only trying to recoup some of my costs? Seems mad if I have to pay more tax when it's running at a loss?

I know there's a scheme where you can rent a room out to a lodger and get over £4000 per year from it tax-free. Isn't there something like that with a caravan?

dylanuk

Have you filled out a self assessment return before?

In the property/letting section you have to fill out your income and you have to fill out your related expenses, inc. wear and tear if it's fully furnished, running costs, repair bills, etc...

The same applies if you were putting in that income as a 'business'. I'm not sure if a caravan would be classed as property rental income or not, so you'd have to check with an accountant.

Also, what RayWolfe highlighted is also true - if you're also using it for yourself then some of your expenses would become percentages to stop you claiming back personal expenses. For example, if your electricity bill is £100 a year and you use the caravan 30% of time and let it out 70% of the time - then you'd only be able to claim back 70% of your electricity bill, e.g. £70.

So you're not technically able to put £2000 as extra income on your tax return without also putting your expenses, unless you lie and say you had no expenses (which would be silly).

You don't have to set up a business to claim expenses. You just put them in on your tax return along with your income. The 'registering for self assessment' thing is just to tell HMRC you are earning money that isn't being taxed before it gets paid to you (as it would for salaried employment), then they just know to send you a tax return form each year to fill out.