Renting house and disappearing

rosysparkle

No, sorry that's not accurate.

Rental income sits on top of any other income you have and is taxed at the appropriate rate of 10%, 22% or 40%, depending on your level of taxable income.

If you were to let your house out via an agent, the agent is obliged to tell the revenue of this on their Section 19(1)(c) TMA return.

I don't think anybody should advise you to attempt to evade taxes.

However, there are several ways that you can minimise your tax bill for the rental income and it may be that you will not be subject to tax at all if you have no other income arising in the UK while you are travelling.

PoorDave

Suewre wrote:

It is 40% tax for rental income - it is classed as unearned income.

No it isn't. *shakes head*

clutton_2

i also know of 3 folks who let their house out when abroad and it cost them a lot of money to get their house back when they returned. its hard enough managing property in the UK, let alone when you are abroad, and when you have not done it before.

if you don't use an agent how are you going to get repairs done ? get your CORGI gas certificate done ? deal with tenants bad behaviour if the council write to you ? deal with non payment of rent if it happens ?

lynzpower

Also to say it is an offence to rent a house from abroad - you HAVE to by law have a managing agent in the UK. We found this out when starting court proceedings against our old LL

movieman

if you don't use an agent how are you going to get repairs done ? get your CORGI gas certificate done ? deal with tenants bad behaviour if the council write to you ? deal with non payment of rent if it happens ?

Since they're planning to evade tax, presumably they're not planning to bother with any of the other legal issues either.

However, as others have said, that's a big problem if the 'friend' decides that they can't be arsed to pay the rent. What can you do about it when you're thousands of miles away and renting to them illegally in the first place? All it takes is a couple of phone calls by the tenant and the mortgage company and Inland Revenue will be looking forward to a very interesting chat with the landlord when he returns to the UK.

PoorDave

As long as the respective income tax payment dealine hasn't passed, if the IR do contact you, surely you could simply pay the tax. Except maybe they will only contact you when it's too late.

Depends how your travel plans fit in with the important dates of our tax system.

Aren't you allowed to earn a certain un-taxed income from having a lodger anyway? But is this true, and where's the line between renting it out fully and having a lodger there while you're away? Surely if the lodger was part of an arrangement you had before you left, and all you'd done is go travelling this might be ok. check the rules though.

Your rent would total £4800 per annum, so providing you were away for a whole tax year and not earning at the same time, this would be below the income tax threshold anyway, i think. So no tax due.

I would find out what a realistic market rent is, as if it's loads more than £400pcm, even after tax, why not let it out properly through an agent?

Acc72

If you are travelling, then I gues you will not be earning as well ??

Therefore, it may be that the income from letting your house is less than your personal allowance and you will not pay tax anyway.

It might be worth paying an Accountant £200 to run over the implications - you will be able to claim tax relief on the interest element of the mortgage (so don't make any lump sum payments yet - use your ISA allowance) plus relief for repairs / wear and tear.

The_Viking_3

rizla01 wrote:

Hi,

Have a good trip. Hope it all goes well for you.

My only thoughts are:-

How will the IR know how much you are charging for rent and how much is your mate charging YOU (able to be offset against tax) for looking after your house in return?

Just make sure that payments to you aren't traceable IE not paid into your bank A/C and not paid out of his bank A/C.

I can't see how you can get caught out unless the house burns down and your Mortgage Co try (As they will) to get out of paying you.

Also, be wary of your 'Mate' sub-letting!

Then again, why tell the IR ANYTHING. just disappear, surely.

Why not pretend that you are living in your house all the while? Who'd know?

Exactly - who'd know? BUT, when i come back I'll need to talk to the IR about reclaiming the income tax I have paid (at full rate) since April 06. Then I might get asked all sorts of difficult questions. What I'm wondering is how the tax office will play this - will they just process my income tax rebate application (which'll be small), or will they start to ask difficult questions about my house etc? Will they look at bank records etc?

For the record, I am a little concerned with the tenant - he's not much of a mate - more a work acquiantence really. I rather assumed he was skint as he's an agency worker - turns out, he's a qualified accountant and minted - he didn't tell me that when he asked and got a sizeable reduction on the rent! That said, we have a contract and I have friends/neighbours who can keep and eye on the place, and he's in his fifties so not likely to be on the pop all the time or anything.

We've agreed that he'll pay weekly by direct debit, so there's no chance that I can get the money cash in hand. Do the IR ask to see bank account details? This is the only way they could prove I'm receving income I'm not declaring.

Does anyone know for a fact that rental income that is less than a personal allowance is not subject to tax when the owner is abroad? I'm not sure about that...

The_Viking_3

lynzpower wrote:

Also to say it is an offence to rent a house from abroad - you HAVE to by law have a managing agent in the UK. We found this out when starting court proceedings against our old LL

Is that true? Seems a little unlikely to me - we have a contract - don't see why you have to have an agent as well?

lynzpower

yes, well it is true according to the Private Tenancy Officer at my local council

Who is going to provide maintainence while you are out of the UK? If the place burns to the ground how are you going to sort it out if you are in the sahara or indeed anywhere? Thats why you need to provide a managing agent - it can be someone you know ( ie a parent /sibling??) but they have to agree to it obvously, but they have to be appointed to be the 1st reference for the tenant in case of emergency. without this, the oficer said, theres no safety measures in place.