New Landlord: tax confusion, please help!

Windsorcastle

I am very confused as to whether I need to declare my rental income to HMRC at all, as I have been receiving a rent of £750 a month to cover a mortgage of £575 a month (hence a profit of £175 a month). So this is a total profit of £3500 a year and then I have got all my deductions and wear and tear etc to take off that. So if that all brings my profit to less than £2500 a year, do I not need to declare it at all?

I'm confused as to whether I need to declare the total income or just the profit once I've paid my mortgage. If anyone could explain this very simply to me I'd be very grateful. I've been renting the property for over a year now and am now worried I've got this wrong and am going to get in trouble...:o

Also do lettings agents give HMRC a list of all their properties and landlords, and am I going to get in trouble that way?

N79

All rental income must be declared.

Only the interest on a mortgage can be claimed as an expense.

Alias_Omega

As N79 said.

The mortgage should be split into 2 parts -

Interest & Capital Repayment.

You can only claim the expense of the interest part of the mortgage, so if the mortgage was £500, with £300 interest, and £200 capital, you could only claim £300 per month in expenses.

For you, i would pay the £150 a year, and get yourself an accountant for this. Again, this cost is taken out as an deduction from the overall profit form the house.

tbs624

Stop panicking. You can ring HMRC you know - some of their employees are almost human

Have a look at the HMRC website - google PIM500 (property income manual) and http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/index.htm

Sign up to a LL association and/or Tessa Shepperson's Landlord Law. Tax deductible membership fees, discount LL ins premiums and much useful info

Windsorcastle

Thanks for those answers. But will I be in trouble for not contacting HMRC earlier???

Gwhiz

Windsorcastle wrote: »

Thanks for those answers. But will I be in trouble for not contacting HMRC earlier???

Lethal injection apparently! Of course, you could just call them to find out for sure

tbs624

OP - you say that you have been renting the property out for over a year?

Say you started renting in June 2009 - this falls into the tax year Apr 09-Apr 10, and you would need to have sent in your tax return by Oct 31 2010 if completing a paper return or January 31 2011 if doing it online.

Just call them , then you can sleep at night

chewmylegoff

Windsorcastle wrote: »

Thanks for those answers. But will I be in trouble for not contacting HMRC earlier???

depends how much time has elapsed since you started receiving rental income - but even if you would be liable to a fine it's still better to declare now than not to, as it will only get worse the longer you leave it.