Tax on Rental Income

rksworld

Hi, I am a newbie to this forum, also a newbie landlord. The background here is that in June this year I let out the flat that we (me and my wife) jointly own, we have now moved to a rental property closeby. I am yet to notify HMRC & the mortgage company about the letting. The deposit that we received from the tenants was placed in a Govt Scheme (DPS), albeit with me named as the landlord. I have had my wife named as the landlord on the tenancy agreement as she does not work anymore and hence has her personal allowance can atleast be offset against any tax liability. I am on PAYE as a permanent employee and never had to worry about tax matters previously. We get a rent of £1000 deposited in my wifes bank account and the repayment mortgage costs us about £775 with like a £350 interest component(I think!) My questions are:

1) Is there a problem if Im the named landlord on the DPS Scheme and my wife is the landlord on the tenancy agreement? Will HMRC make me liable for paying tax as well? Also, does anyone know how to get DPS to change the landlord name, there doesnt seem to be any info on the DPS website!

2) When do I need to notify HMRC, are there any penalties for late notification?

3) Should I just go to an accountant instead of doing the SAF on my own?

4) How much would be my tax liability?

5) Also, we recently got a boiler repaired, can we set off such expenses against the taxable income? Does this need a receipt?

6) Will I need to submit my PAYE form that I get from my employer (showing income, company car tax etc) as the property is jointly owned?

7) Can I claim that my wife pays me to administer the property and hence set this expense off? Does this need receipts?

8) Whats the sanction for not informing the mortgage company? I am aware that Im required to pay some £250 for getting some sort of ok from them to rent out, but was honestly taking a chance there as I have never changed my mailing address.

I know that if I browse through the numerous posts here I probably could cobble up some answers to the above, but would really appreciate if some of you could give me some quick insights or point me in the right direction. Much appreciated, Thanks

scottishblondie

For starters -

(1) If you own the property jointly then the income from the property has to be split between you in the same proportion, you can't just say it's all your wife's income to avoid paying income tax on it. The interest on the mortgage can be set against this, but not any capital repayment.

(2) You should be filling out a self assessment tax return to declare the new income, you need to check the deadlines for doing that for the tax year 10-11 yourself, but you haven't passed that yet.

(3) It should be fairly straightforward to sort out yourself, but if you aren't confident then an accountant could be a good idea.

(4) Your liability is the tax on your share of the rental income.

(5) I think some part will be but I'm not sure, you'll need to keep all receipts related to rental expenses.

(6) Not sure exactly what you mean here?

(7) As you jointly own the property I'm pretty sure this isn't allowed.


I hope some of that helps you, there are people on here who know much more about this than me who I"m sure will be along shortly.

This government page also gives a lot of info.

chrismac1

1. As joint owenrs the income is shared 50-50 in the absence of a Deed of Variation.
2. By 5 October 2011 on the assumption that you started renting during the 10-11 tax year. Not sure of the penalty for late notification, it's £100 for a late tax return.
3. Sound like a fairly easy return, if you go to an accountant expect to pay £150 to £200 to cover returns for both of you. if DIY then get learning!
4. Depends on what tax band you are in, and the final rental profit after all allowable expenses are taken into account. See various websites about all the rules on this.
5. All repairs are fine. Where care is needed is where "repairs" are affecting the structure of the building and hence improving the capital value. So a new conservatory is not OK!
6. You'll need to take the details of income and tax paid off your p60, add in any benefits in kind and knock off expenses allowed - and put these on the self-assessment form.
7. Sorry no. This is a jointly owned property so paying the owner to administer it is robbing Peter to pay Paul.
8. Depends on the individual mortgage company, many are OK so long as you tell them about it.

mlz1413

rksworld wrote: »

.
1) Is there a problem if Im the named landlord on the DPS Scheme and my wife is the landlord on the tenancy agreement? Will HMRC make me liable for paying tax as well? Also, does anyone know how to get DPS to change the landlord name, there doesnt seem to be any info on the DPS website!
don't believe DPS and TA names matter.
I think you can alter the split to 1% you 99% wife - probably a deed of variation but I've no personal experience of this, a solicitor question I think.
2) When do I need to notify HMRC, are there any penalties for late notification?
You should tell them you have started renting so they can give you a unique reference, but you will need to fill in the forms online by October, so after April 6th get yourself down to the tax office if your unsure of anything or get an accountant.

3) Should I just go to an accountant instead of doing the SAF on my own?
this is a simple rental so if you read up on your duties as a LL before April you can decide for yourself.
4) How much would be my tax liability?
Rental income less allowable expenses
try direct.gov website, tax on rent from properties

5) Also, we recently got a boiler repaired, can we set off such expenses against the taxable income? Does this need a receipt?
yes you need a receipt, if you can claim depends on if property was rented at that time.

6) Will I need to submit my PAYE form that I get from my employer (showing income, company car tax etc) as the property is jointly owned?
you can do a short form for letting property that will not need your earnings if you are on PAYE.

7) Can I claim that my wife pays me to administer the property and hence set this expense off? Does this need receipts?
If you charge for your time you will need to be a advise this on a SA tax form and will therefore not be able to do the short form advised in 6.
I believe you will also need to be a business and am sure there are rules on spouses charging each other. Ask an accountant for advise on this.

8) Whats the sanction for not informing the mortgage company? I am aware that Im required to pay some £250 for getting some sort of ok from them to rent out, but was honestly taking a chance there as I have never changed my mailing address.
your breaking your T&C's as I'm sure if you read your residental mortgage details you shouldn't be letting it out without the lenders permission.
I know that if I browse through the numerous posts here I probably could cobble up some answers to the above, but would really appreciate if some of you could give me some quick insights or point me in the right direction. Much appreciated, Thanks

There is a forum for house buying, selling and renting which will have more posts of this type.

Join a LL association like Landlord Zone and find our your responsiblilites ASAP.

Fred1_2

mlz1413 wrote: »

Join a LL association like Landlord Zone and find our your responsiblilites ASAP.

Landlord Zone is good (and free!), but I have benefited from joining the National Landlords Association https://www.landlords.org.uk. I'm told that the residential Landlords Association is very good too, I just chose the former because it has a local group and the latter doesn't for me. Also look at any accreditation scheme run in your area. The introductory training for the Welsh scheme https://www.welshlandlords.org.uk was 85 tax deductible pounds well spent when I started.