When to pay the taxman...?

*Summertime*

I am going to be letting my house out, not making a profit just covering the mortgage. I'm then going to be renting another house on an estate (these houses cannot be bought hence renting one).

My question is when do I declare the rent to the taxman for him to take his chunk? Not that I think it is fair at all as I work full time and pay enough tax as it is! And like I say I am making no profit.

Thank you for your help.

Gwhiz

If you make no profit you'll pay no tax.

You should inform the tax office that you are renting out and they can send you the relevant property tax forms which you will fill in at the end of the tax year.

Currrent tax year ends 5th April 2012 so you will not have to submit your return until end September 2012 (or January 2013 if doing it online).

angrypirate

You can only offset your tax against interest on your mortgage - not on repayment.

tbs624

OP - timings are as Ghwiz says.

Note that if you have a residential mortgage on this property you need to seek Consent to Let from your Lender. You'll be in breach of your mortgage Ts and Cs if not.

Got LL insurance in place? Gas Cert? EPC? Sorted out which tenancy deposit scheme you'll use (if property is in Eng/Wales)

angrypirate wrote: »

You can only offset your tax against interest on your mortgage - not on repayment.

You offset your mortgage interest payments etc against your rental income to arrive at your net income figure, which is then used to ascertain any tax due. Edit: google HMRC Property Income Manual (PIM) for full info

kingstreet

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10014027

Allowable expenses
The expenses you can deduct from letting income (unless it's under the Rent a Room scheme) include:
letting agent's fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountant's fees
buildings and contents insurance
interest on property loans
maintenance and repairs to the property (but not improvements)
utility bills (like gas, water, electricity)
rent, ground rent, service charges
Council Tax
services you pay for, like cleaning or gardening
other direct costs of letting the property, like phone calls, stationery, advertising
If your annual income from the letting for the tax year 2010-11 is less than £70,000 (before you've taken off expenses) you include the total expenses on your tax return; if it's £70,000 or over you need to provide a breakdown.
Bear in mind that you can only claim expenses that are solely for running your property letting business. If the expense is only partly for running your business (or if you use the property yourself) then you may only be able to claim part of it.

GillsMan7

As the others have said:

If you rent your home out at, say, £500pcm and your mortgage payment is £500pcm you may think that you don't make any profit, but in fact you do.

If your mortgage consists of £200 interest and £300 repayment, then your profit effectively stands at £300pcm. There are things you can use to offset this profit, which Kingstreet already linked to.

If you don’t think this is ‘profit’ then remember that every month your mortgage is reduced, so you are making a profit, even if it’s not in pure cash. I make £100pcm pure cash profit on my property every month, but in reality it’s more because my mortgage is repayed a little bit every month.

And it’s absolutely fair that you pay tax on this. I work full time and pay tax too, and it’s fair that I pay tax. I’m in a position to do pretty well out of my rental property (and soon to be rental properties), so paying a relatively piddling amount of tax is more than fair enough IMO.

tyllwyd

Gwhiz wrote: »

...Currrent tax year ends 5th April 2012 so you will not have to submit your return until end September 2012 (or January 2013 if doing it online).

But remember that if you plan to use the online self-asessment website, it takes a little while to get set up when you register to use the website, and the tax also needs to be paid by 31 January, so my advice would be to get started on it a couple of months before to give time to sort out any problems and to get a bit of pre-warning of how much money you will need to pay.

Gwhiz

tyllwyd wrote: »

But remember that if you plan to use the online self-asessment website, it takes a little while to get set up when you register to use the website, and the tax also needs to be paid by 31 January, so my advice would be to get started on it a couple of months before to give time to sort out any problems and to get a bit of pre-warning of how much money you will need to pay.

Just laying out the dates. I agree with this though.