Didn't declare tax on rental income

woter324

Hi,

In a few places, this post seems to suggest that a Landlord can get tax relief on the interest part of mortgage repayments.

I've been hunting the HMRC website for evidence of this and I've only been able to find this document

You'll have to search for PIM2120 on HMRC's website as for some reason I am still a new member (I joined in 2010) and can't post links. Grrrrrr!!! How does this stop spammers Martin?

If I understand this correctly, I can only claim back the interest on the first £30,000, albeit at 10%. On a modern-day mortgage that's pittance!

With the document dated 1999-2000, there has to be a more resent document. Does anyone have a link or is this law still current?

Many thanks

W.

kingstreet

Here's a list of allowable expenses;-

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

You can claim interest on a mortgage upto the full value of the asset which is let to generate the income.

For example, if you remortgage your home raising £100k to buy a property, you can offset interest on that £100k against the rental income.

Alternatively, if you have £25k cash and use that as a deposit to buy the property and raise a £75k mortgage to buy it, you can only offset the interest on the £75k mortgage.

It is essential that where the finance to buy the BTL is raised on your own residence, there is a clear audit trail for HMRC to follow to be able to identify the funds were raised for the purpose of purchasing the BTL property.

00ec25

woter324 wrote: »

PIM2120 on HMRC's website as for some reason I am still a new member (I joined in 2010) and can't post links. Grrrrrr!!! How does this stop spammers Martin?

If I understand this correctly, I can only claim back the interest on the first £30,000, albeit at 10%. On a modern-day mortgage that's pittance!

With the document dated 1999-2000, there has to be a more resent document. Does anyone have a link or is this law still current?

PIM 2120 covers the OLD rules when mortgages were still available with interest relief at source ie MIRAS
as that was abolished then the first page is now the replacement "rule" although as it is written for use by HMRC staff not the general public it does require some background knowlegde to see what it's saying.

what Kingstreet has posted is the correct interpretation of the technicalities of PIM2105: for example...
interest allowable as a deduction provided the capital account is not overdrawn means size of loan limited to value of property when first let)
must be wholly and exclusively means the cost (interest element) you want to deduct must relate to only the money borowed and spent on the let property


BTW - the ability to post links is tied to the number of posts made to date, not the date of joining. You can post links after your 10th post

jamesrobins

Just been on the phone to chase my tax payer number. One of the (hopefully) many LL's who didn't register when they started renting a property.

Have been renting a flat for 3 years with very little profit so hopefully I don't get stung for much, unemployed at the moment too. My own fault, should have sorted it earlier.

Anyway, lots of useful replies in this thread so thanks everyone.

CWSmith

I did exactly the same when I first rented out my mum's house.

Tax didn't even cross my mind ................... It took 2 years to realise, when (scared to death) I gritted my teeth and phoned the IR.

The tax office were absolutely fine about it. No prison - not even a telling-off at all!

G_M

HMRC are generally sympathetic if you come clean. And pay up where tax is due.

They are less sympathetic where they have had to come to find you.

guitarman001

I know several people who let out rooms and none of them declare any of it!!! And it must be at least £400 a month!!

theartfullodger

guitarman001 wrote: »

I know several people who let out rooms and none of them declare any of it!!! And it must be at least £400 a month!!

Well, grass them up like a loyal British citizen!!

We don't want tax-cheats here any more than we want other thieves such as house-breakers or benefit-cheats...

http://www.hmrc.gov.uk/reportingfraud/

thelem

That's allowed, if its one room in their own home and the total rent is no more than £4250 per year. If that doesn't apply, then it's tax evasion and there are serious penalties if caught.

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

guitarman001

Yep, they're definitely over the threshold... I know LOADS of people doing this... and they all boast loudly about it!