Tax on rental income

gr8t007

Any advice or experience on the following:-

I purchased my 1 bed house back in 1999, I lived there until 2008 when I temporarily moved in with my partner at another address.

So in 2008 I rented out my 1 bed house for about 18 months via the local council who had found a tenant (The tenancy agreement was with myself and the tenant). The tenant was eligible for housing benefit but this was paid directly to me to my account by the council.

The rent I received from the council in this time did not cover the mortgage so each month I topped up with my own savings to meet the mortgage repayments so there were no financial gains during this 18 months let.

Anyway, I never returned to the property and finally sold it in 2010.

I today receive a letter from Inland revenue stating that they note I was letting a property (maybe the council informed them) and they do not have any records so they are asking for information and dates on income and so on etc so they can work out the tax and make adjustments.

I am not running a business here, neither do I even own the property any more. I do not have a problem in providing the information but I am not sure what they want to tax. I have 2 weeks to reply to them.

Can anyone advise on this and best way forward

kingstreet

You need to work out the rent you received, then deduct from that the mortgage INTEREST payments, any repairs you paid for, letting and management charges and any other allowable expenses to see if there was any surplus left over.

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

If there was a surplus, it would be taxable.

Note - the mortgage capital repayments, if you made any, aren't a trading expense you can offset.

Don't forget to split things according to the tax years 6 April to 5 April.

gr8t007

Interesting.....

The mortgage was interest only and exceeded the rental income by about £100 per month.....so there was no surplus.

This does not include any repairs or maintenance I paid during this time, I would say I was out of pocked by about £1400 p/annum in total.

Would they still want to tax my losses???? (wouldn't surprise me the way the IR is going these days).

Will they fine me as I did not inform them.

If anyone has any other advice or experience on this kindly let us know how the IR handled your case.

BitterAndTwisted

In which case you are probably owed a tax-refund from the Revenue. Provide them with all of the info re income and expenses and see what happens.

G_M

If you are receiving rental income, yes, you DO have to declare it.

However from what you say it sounds like there will be no tax to pay.

You will need to give them the information though so that they can assess/verify. After all, until you tell them they don't know that your allowable expenses (mortgage interest; agents fees, maintenance; etc) were greater than your income.

All the rules are here.

jimjames

BitterAndTwisted wrote: »

In which case you are probably owed a tax-refund from the Revenue. Provide them with all of the info re income and expenses and see what happens.

A loss would be a good result if you can offset against other income. They may want proof that it was a market rent - although if renting to council not a mate then that should be easier to show.

00ec25

jimjames wrote: »

A loss would be a good result if you can offset against other income. They may want proof that it was a market rent - although if renting to council not a mate then that should be easier to show.

No, you cannot offset a loss from property renting against anything ofther than profits from property renting

as the OP appears to have had only the one property letting business then all he can do is declare the loss and carry it forward indefinately in case he ever makes a profit from property renting in the future, he cannot offset it against other income

gr8t007

Just to update on this thread...I contacted the Inland revenue and informed them that I had rented out the property and sold it last year gave him the details as stated in my thread....... apparently it was the Local Council who provided them with details of the properties that are being let out. Anyway he made a note said that it was fine and he would close my file.

Another worry of my poor shoulders.....

Thrugelmir

gr8t007 wrote: »

Just to update on this thread...I contacted the Inland revenue and informed them that I had rented out the property and sold it last year gave him the details as stated in my thread....... apparently it was the Local Council who provided them with details of the properties that are being let out. Anyway he made a note said that it was fine and he would close my file.

Another worry of my poor shoulders.....

Though interesting that the HMRC are using Council records to locate landlords who have never declared their rental income.

There'll be plenty more Landlords who will be finding a tax demand landing on their mats.

chappers

As has been said you should make sure this is recorded properly on your tax record so that
1) any future rental losses can be added on
2) these losses can be used to offset against any furture profits.

G_M

HMRC these days use all sorts of sources to find landlords.

Got more than one property in your name at the Land Registry? Don't be surprised if they contact you about Capital Gains when you sell one, or to investigate rental income.
Council tax? Maybe you pay one month a year between tenancies?.........
HB tenant?
As for whether mortgage lenders, insurance companies, banks provide relevant info to HMRC... wouldn't surprise me!