Rental income - please help

mumtoE

Hi

I've been renting out my house since I think about July 2004 (as moved in with my boyfriend into his house) and I am very ashamed to say haven't declared it - not really by intent of tax dodging just through naivity and having a baby (and burying my head in the sand). I need to stop my sleepless nights and plan to fill in a tax return. Never done this before ...what do I do? Do I just fill one out for last year or declare all? For last year is that Apr 05 to Apr 06? I was on maternity leave this year (work for NHS) and think am owed tax back...do I add this to my form? (which I havent seen yet...will have to do online)

year July 2004-Apr 2005 think must have had loss as pay £550 mortgage (redemption) and get £485 back from agency after their deduction per month, then have about £20 insurance every month and I think this year I paid at least £1000 for chimney work.

Year Apr 2005-2006 (is this what Im declaring now?)mortgage and insurance as above and think paid about £400 for roof repairs.
Will I owe a lot...I really dont have any money with a new baby. My partner doesnt have any disposable income to help out.

Will I owe lots of money and have a huge fine for not declaring?

I ended up not claiming working tax credits either because of all the fuss about them overpaying etc...can I do this once my tax is sorted with the rental income and have it backdated?

Thanks so much, please give me an idiots guide as to what I should do.

Hoddie_2

You'd need to contact HMRC and report that you've had rental income since 04/05. There would be an automatic £100 fine for 'failure to notify'. Other penalties, such as interest and 5% surcharges, depend on whether there was any profit or not. The longer you leave it the higher these will be. Once you have the forms either call HMRC or come back on here and I'm sure people will be happy to help you complete them.

If your other taxable income was more than circa £7k/year, your rental profits will be taxed at 22%. If your total income reaches £35-38k, you may owe some at 40%. Without more details of your income it would be hard to say.

Tax credits can only be backdated for 3 months at most so I'd recommend you claim asap - call them for an eligibility check on 0845 300 3900. You could use the tax credits to go towards your tax bill.

mumtoE

Thanks Hoddie - you have no idea how anxious I am and scared about all of this. Can I just go online and fill out a form or do I have to telephone to 'declare' and request forms - I am aware time is running out and want to minimise my penalties. I was on the higher tax bracket until May 05 as I was temporarily acting up for my managers mat. leave then down to £32K from May 05. Looks like I've lost out on the child tax credits you get for an under one year old then...I was always under the impression I could backdate more than 3 months (my child is now 15months).

Hoddie_2

It honestly isn't worth losing any sleep over this. You're obviously willing to sort it out and that will help your cause. You can either call or write but you'd get the forms much quicker if you call (by a good 2-3 months!).

The people who answer your call won't judge you or anything, they'll just arrange to have the forms you need sent out. In fact, you be unlikely to hear from anyone else for a good few months. You'll get statements, penalty notices and requests for payment, etc, but so long as you do pay you'll be fine. As I said above, the longer you leave it to pay, the more interest you'll incur.

If you can, start saving towards any tax bill now, add to that any tax credits they pay you. It should be possible to advise what your income tax bill would be (including interest, etc) if you can provide details of your income and expenses.

mumtoE

ok. What I don't get though is why I just can't fill out a form online...or can you only do that if you have declared and done one before? Will dig out receipts and exact details then post them and see if someone can give me an idea of what I'm looking at.

angiesdesire

You will need to speak to the HMRC to get them to send you the relevant paperwork. You will also receive your Unique Taxpayer Reference number (which is required to file a self assessment online). To file online you will also need to get a register at teh HMRC website. This process will enable you to access various online services including Self Assessment / Tax Credits etc. You will not get the activation key for about 7 days, as they send this out via snail mail.
I was in a similar situation and like you was worried about contacting the HMRC, but I honestly found the staff at HMRC to be very helpful and professional in helping me sort out my affairs.

Hoddie_2

You cannot file previous year returns online. The only return you can file online at the moment is the 2005/06 one, and as angiesdesire says, you're unlikely to get the required registration details through in time.

mumtoE

Thank you. I made a telephone call to the tax office today so am waiting on the forms. Will prob post for advice re. how to complete them once they arrive.

firesidemaid

hi there

spent a few years renting out my property and filling in tax returns just for this purpose. they really aren't that bad when you get used to them. they come with full instructions - especially useful for the land and property bit that you'll need. also, you can ring the helpline as much as you like, and they'll help you with each section.

if you are a professional within the nhs you can also claim tax back on professional fees/memberships etc.

for the property section you can only count the interest bit of the mortgage, not the capital, and you have to take the income as the gross rent and then are allowed to claim for some fees, repairs, insurance, wear + tear etc.

hope that is helpful for now.:o

MarkyMarkD

If you genuinely made a loss in the first year, you can carry it forward and offset it against your rental income profit in subsequent years.

But as sazza says, you can only deduct mortgage interest (and charges) and not capital repayments. This might be a bit of a pain to work out depending on your mortgage statements, but if you know the rate applicable at each point in time a bit of spreadsheet work will get you to the answer.

I'm hoping that you've informed your lender too?

mumtoE

Thank you - received the forms , look like gobbledygook but will attempt to make sense of tonight. I did inform my lender - payed £100 for honour...but bizarre thing is still send mortgage correspondance to old address. May be lots more questions coming soon...............