Rental Income Tax

mac123

I started to let my house from September 2006 as I needed to move away to London - It is a jointly owned property by myself and my fiancee and wondered when do i have to submit a tax return and do we have o do one each??

In brief, the rent (after managing agents deductions) is £80.00 per month less than the mortgage - What do i need to pay the tax on and what can i offset against it

Cheers in advance

Mac

silvercar

have a look at https://www.hmrc.gov.uk/findout

it will tell you how to deal with the tax issues. basically you include the renting property section in your tax return, unless the amounts are small.

Innys

£80 a month??? Before you take into account the mortgage interest?

I doubt very much that you would have any tax to pay. If you do, it will be fairly minimal and, assuming you're employed, the HMRC may even just adjust your tax code instead.

scope

Innys: which part of the income is taxable? Can you deduct the mortgage before calculating the tax?

mac123

Innys wrote:

£80 a month??? Before you take into account the mortgage interest?

I doubt very much that you would have any tax to pay. If you do, it will be fairly minimal and, assuming you're employed, the HMRC may even just adjust your tax code instead.

yeah, for example mortgage (repayment) is £450.00 per month, rental income is £400.00 minus approx £30.00 agents fees etc

Ian_W

Whether it's an Interest only or repayment mortgage doesn't matter, that's your choice - but you can only claim the INTEREST on the loan as an expense for tax purposes.
So if your £450pm is say £350 interest and £100 repayment of capital, only £350 is claimable. If you don't know how much is interest check your mortgage statement or ask your lender.

mac123

Ian_W wrote:

Whether it's an Interest only or repayment mortgage doesn't matter, that's your choice - but you can only claim the INTEREST on the loan as an expense for tax purposes.
So if your £450pm is say £350 interest and £100 repayment of capital, only £350 is claimable. If you don't know how much is interest check your mortgage statement or ask your lender.

and i take it the managing agents fees are also claimable??

My main query was if i started to let the property in September 06, when should be my first tax return??

thanks for all your help

Ian_W

Yes - there is a fairly comprehensive list of allowable expenses at:
https://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10014027

If you don't get a SA form as a norm ask for one including the property income pages - which are a supplement. If it's jointly owned you'll both need to do one AFAIK and split the income and expenses between the 2 of you. Tax year ends 5/4/07 and the form has to be returned before end of January 2008.
As it's your first year you might want to think about using an accountant - their fees are a claimable expense - if you supply all the details it shouldn't cost too much and they may spot things you can claim that you wouldn't and save you money. Once you've got this year over with and seen how it's done then it is fairly straightforward to do your own in future years.

Musicman

mac123 wrote:

and i take it the managing agents fees are also claimable??

My main query was if i started to let the property in September 06, when should be my first tax return??

thanks for all your help

Your first Tax return will be at the end of the Tax year when you started renting out, I.e April 2007. I started letting a property in April, but did not have ti file a return to the following April, at the end of the tax year.

h4nym

Mac

You're making an £80 monthly loss on this? Is your mortgage a repayment or interest only? The other question is are you letting furnished or unfurnished? If it's not unfurnished, then you can also deduct 10% of your gross income (ie before agents' fees) against the cost of replacing furniture / equipment etc.



The loss is significant - if you intend to carry on being a landlord, then you can carry those losses forward to offset profits made later.

Musicman is quite correct, but in this case, I wouldn't leave it till the last moment - call them up in May and tell them you need to complete a tax return. I assume that you have a P60 every year from your main job? In that case, you can fill in your return very quickly and easily. You'll have your salary (on which you've already paid the appropriate tax and NI) , and £560 of losses to register.

If, however, you've got a repayment mortgage, and the capital repayment is more than £80 per month, then you'll likely come in to profit and there's gonna be a little more to pay.

H

MXW

If profits from rental income are less than £2,500 you do not need to complete a tax return, a schedule of income and expenditure will be accepted.