Didn't declare tax on rental income

Tommyt

So I'm one of the foolish people who hasn't been declaring their rental income. Long story is I'm a non-resident Brit who left the running of my flat with my parents. I thought they'd taken care of it, they thought the letting agent had...

I'm guessing after deductables I've maybe made £1500 taxable each year for 6 years and I want to sort this out.

Should I go to accountant first and get them to sort everthing before the revenue? Any idea how much my stupidity might cost me?

silk_2

It's interesting that you can only declare the "interest" portion of your mortgage as non-taxable, if you think about an offset mortgage.

Isn't that basically penalizing people for having savings i.e. on an offset the more savings you have, the lower interest you pay, thus the more the taxman will take from your rent?

Also, it's be nigh on impossible to work out accurate values since the interest paid on an offset can fluctuate wildly depending on rates and your savings.

I mention this because my brother has an offset with savings and is thinking of renting his house out due to relocation. Maybe I should tell him to remortgage it to a normal mortgage first?

Or does it work very differently with an offset since your bank account is basically always negative?

Mallotum_X

silk wrote: »

It's interesting that you can only declare the "interest" portion of your mortgage as non-taxable, if you think about an offset mortgage.

Isn't that basically penalizing people for having savings i.e. on an offset the more savings you have, the lower interest you pay, thus the more the taxman will take from your rent?

Also, it's be nigh on impossible to work out accurate values since the interest paid on an offset can fluctuate wildly depending on rates and your savings.

I mention this because my brother has an offset with savings and is thinking of renting his house out due to relocation. Maybe I should tell him to remortgage it to a normal mortgage first?

Or does it work very differently with an offset since your bank account is basically always negative?

There is no penalty. The interest paid would be deductible from the income.

If interest had been earned on the savings in a savings account then this interest income would have attracted a tax charge.

The impact of an offset is you dont pay as much interest out, but also you don't earn interest on savings. Generally mortgage interest would be at a higher rate than savings anyway so the person has benefited from the offset.

wishus

This is also me.

I read the HMRC website years ago and believed I didn't have to tell them because my rental income wouldn't go over the threshold at the time. But you do at least have to to tell them.

Nice as pie with me for owning up to 3 and a bit years' undeclared income. It's all on record, so I just need to call them back when I have all the info to hand. Things like: agents fees, insurances, maintenance costs, insurance on mortgage. So, we need to work out whether I exceed the threshold of £2500 with these deductions taken into consideration.

If you do not exceed the threshold, there will be no penalty, and as a PAYE employee, I can make an adjustment in my tax code to cover this.

If I do, it will be a case of completing self assessment for the missing years.

I know if that's the scenario, there won't be much to pay for the actual income tax, but info on the penalties is pretty vague. If they had found me out, it could be up to 100% of the owed amount, but as I've told them it's just not clear.

I'll keep you informed. :embarasse