Tax return

JC2005

Hi will I need to fill in a tax return for this year, for the cottage I am renting out. I will not make any profit this year at all, because of the cost of renovating it. And could I off set my tax on the cottage on my morgage on my home. Most of the morgage I took out was to do the cottage up, but had to take the morgage out on my home as no one would lend me on the cottage. Thank you for any help you can give.

ceeforcat

Yes - you do need to tell Mr. Taxman if, as you state, you are making a loss and wish them to be carried forward to reduce profits from future years. However, as you stated that you are renovating the cottage, you need to be aware that not all expenditure reduces profit on rental income. Capital expenditure (loosely -permanent repairs that add value to the house) are not available to set against income.
Finally, if your mortgage on your main home was, say, £90000 and you borrowed an additional £10000 specifically to renovate the property, you would indeed be able to claim 1/10 of the INTEREST on your total loan of £100000.

pjclar02

Hello there

Strictly speaking, if the property is loss making then provided your total rental income is less than £10,000 you do not need to submit a self-assessment tax return.

Once the property becomes profitable, as long as your are employed, you can arrange for any tax due to be collected through your tax code until profits reach £2,500 in a tax year. After this point, you will have to submit tax returns.

That said, I agree with Ceeforcat that it is best practice to submit returns to help you track the losses rolling forward to future years.

ceeforcat

Ah - thanks pjclar02 - I see how my post could mislead and have modified it slightly.

JC2005

Hi cheers for that, might be best if I were to see a tax adviser for the first year, just to keep me right.