Registering as LL for self assesment?

Nitramak62

Hi new LL (Through necessity not choice) and looking for some info from existing lL's.

Looks like myself & wife will be receiving rent for the first time on 1st October. (joint owners of property)

what do we do about self assesment?



ie;

• I assume we have to inform tax office straight away that we are going to receive addional income (Will be above £2500 after exemptions (for us both).
• Do both myself and wife have to register? (We Both work)
• Do I give estimates up front & start paying tax straight away or wait till April next year & use actual details?
• If we do wait to april to fill in tax return how do they claim tax owed ? (Do we pay in lump sum or do they change our tax codes for following year). (I have estimated tax on income will be about £150 a month after fees, exemptions etc)

Cheers

Keith

clutton_2

""tax on income will be about £150 a month"

Are you saying you have calculated you need to PAY £150 in tax per month , or that your net income will be £150 per month ?

you need to declare your annual income, less expenses, at the end of the year -

for example my year ends April 4th and i get my return in for December and have to pay the tax by the end of January

Have you looked on HMRC site for all the expenses you can claim ?

RE how to pay - via lump sum or change in tax code .. the tax office is very helpful indeed.. give them a call and they can explain how all this works...

catloverbex

Hi Nitramak62

If you are both receiving rental income from the property then you will both need to individually register for income tax self assessment. To do this you will need to complete form SA1 (available from the HMRC website). I have a vague recollection that you need to register for self assessment within 3 months of being required to do so e.g. in your case by 1st Jan 2011. I might be wrong about this though.

Once you have both completed the SA1 form you will be sent a self assessment income tax return to complete for tax year 10/11. You will need to complete and return this by 31 October 2011 (if you file using a paper return) or 31 January 2012 (if you file online). If you file late you will be liable to a penalty of £100!

Assuming you have no other tax liabilities that are not settled at source (I assume your employment income is taxed under PAYE) then you will be able to pay the income tax on your rental income in a lump sum payment. I assume that the tax on your rental income will be less than 20% of your total tax bill. However, if less than 80% of your tax is paid at source (e.g under PAYE) then you will need to make payments on account for the following tax year. Assuming the payments on account regime wont apply to you - you only need to make one payment of your tax on the rental income and this will be due on the 31 January following the end of the tax year e.g. 31 January 2012 for tax year 10/11.

I assume you are aware of the rules for calculating the amount of taxable rental income? Don't forget that you can claim a deduction against the rental income for any of the following:

- Mortgage interest payments (but not capital payments)
- Any genuine repairs or renewals needed to the property (but not capital improvements)
- Any letting agent fees
- Insurance costs
- Council tax/water rates
- Any other genuine expenses which arise wholly and exclusively as a result of your property letting. (However, you can't take a deduction for any capital costs).

If you are letting the property furnished you may take an additional "wear and tear allowance" which is a flat deduction of 10% of the rental income (less any council tax or water rates paid by you).

I would advise you to keep copies of any invoices, mortgage statements, letting agent bills etc to 'prove' how you have calculated your taxable rental income as HMRC may ask for them at a later date. You should keep these records for at least 6 years. I would not submit estimates of the income to HMRC. Instead complete your tax return and file by the deadline. Then wait for HMRC to confirm your tax payment, then make sure you pay it by 31 January after the end of the tax year.

If you have any other questions then HMRC are usually really helpful and you can contact them on their self assessment helpline - 0845 900 0444.

I hope this helps -

clutton_2

also keep a record of mileage on business, phone calls, stationery, computer costs, if you have a dedicated office at home you use for the business you can offset part of the heat/light costs against the business, professional fees such as joining a landlords association, books and magazines you buy about the business and so on......