Does the TAXMAN Know about your 'buy to let' rent income investment ?

Galeeno

Is it true that the inland revenue are cracking down on people who have had buy to let properties but have not declared these to the inland revenue?

When you declare your buy to let property (rented property) as an additional source of income, to the inland revenue,

The landlord (property owner) it is is working so is already getting a salary

a) then what details about the property do you have to show?

rent amount?

address of the rented property? (or they dont need this? but how do they identify the property? ....or they dont need to, and just need the rent amount ?)

mortgage amount a month?

any bank statements ?

any contracts ?

what else ?
etc?


b) and what is the procedure to disclose this to the inland revenue

c) and how do they tax you on it?

{an example would be great guys.....lets say the rent is £500 a month, so a math example would be great to follow the answer..}



added

t is just when you read other websites, and pages they give diff info.
(tax reducing by reclaiming it back with mortgage interest, maintenance, agent fees etc)

Sometimes you don't know what to believe and what not to believe when you read it online.

browneyedbazzi

Yes, they are cracking down on people who have failed to declare income from second homes - a lot of people will have received letters advising them that they have until a set date to get in touch, declare the income and arrange a payment schedule. Those who fail to respond to the letters (and do have undeclared income) can expect to find themselves in court.

If you have a BTL property your best bet is to call HMRC and discuss it with them.

Werdnal

You complete a Self-assessment form every 12 months to declare your rental income, less allowable expenses and they (may) tax you on the profit. Your rental income is taken together with any other income you earn or receive and taxed as a whole. This may also affect any benefits you receive.

I too have heard that HMRC are clamping down on non-declared rental income, and with the amount of agencies and organisations who share information, it should be quite easy for them to find out who owns what property and whether they are using it as their registered/principle residence. If a LL owns a property, but has their main home elsewhere (indicated by all their own personal records - DVLA, electoral roll, utility bills, CT, bank accounts etc being registered at that address), its not rocket-science to work out that they probably have a tenant and are receiving rent!

You are not required to divuldge the address of the property nor the details of the tenancy. However, HMRC can (and I am sure do) randomly audit accounts and you would therefore need to provide receipts and records of the property to confirm your income if they request it.

Mind you, its not unheard of for disgruntled tenants to tip the HMRC off if they suspect LL is on the fiddle too!

It is impossible for anyone to work out what tax is due by your giving an example of £500 rent/month as you need to know what allowable expenses are taken from that, whether the mortgage is interest only (the repayment amount does not count), any other earnings your receive and therefore what level of tax you already pay, etc. Every LL's personal circumstances differ, so is that £500 clear profit, £500 which is cancelled out by allowable expenses or even £500 which is actually not covering the cost of letting it at all (self-assessment form can show a loss which is carried over toward any tax due the following year).

Are you a LL who hasn't been declaring, or are you just asking from a curiosity perspective?

You will also have to declare the property sale for CGT when you "dispose" of it! HMRC want their pound of flesh then too.


PS Why does the tenant working and already earning a salary have any relevance on the tax the LL would pay on the rent received????

Your questions are a little worrying, as if you are a LL and have such limited knowledge of this, what else are you unaware of? Might help you to read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

Kynthia

There are rules that everyone must follow and declaring taxable income is one of them. Even if there is no profit or you don't believe there is tax due, you still have to declare it. You also can't 'decide' who is receiving the income for tax purposes as there are often rules on this, such as the property owner is the one who is receiving the property income. There are also rules on what expenses are allowable when calculating the taxable profit, as they can differ from the cash expenses and whether you are making a cash profit. There are also rules on what paperwork you must keep and how long you must keep it in case you should be audited in the future.
http://www.hmrc.gov.uk/undeclaredincome/gettingstarted/tax-affairs.htm

Werdnal

From you recent other posts, you seem to be asking the same questions in various different ways.

Basically the answer is, if you let a property for rent, you declare that rent and pay the tax the HMRC impose on you. No-one here can tell you how much you will pay, as no-one knows your individual circumstances, your other income, the expenses your property incurs or anything else about your situation ... other than perhaps you are paranoid about the possibily of having to pay tax ...

If you want reliable financial advice to match your own circumstances and future security, you should seek it from an independant financial advisor who will have access to your whole situation and give you a tailored and measured analysis to your particular needs, rather than asking unqualified strangers random questions on an internet forum.

Galeeno

Werdnal wrote: »

You are not required to divuldge the address of the property nor the details of the tenancy. However, HMRC can (and I am sure do) randomly audit accounts and you would therefore need to provide receipts and records of the property to confirm your income if they request it.

(I sent you a private massage Werdnal)

But if they don't need the tenancy details

then cant people give wrong figures in the tax declaration form for the buy to let?

and give HMRC wrong rental numbers, lower ones... to reduce their tax?

G_M

Galeeno wrote: »

{an example would be great guys.....lets say the rent is £500 a month, so a math example would be great to follow the answer..}

Rent £500 pm for 11months (there was a 1 month void between tenants in month 6) = £5500 pa

Mortgage repayments = £350 pm of which £220 is interest = 2640 pa
letting agents fee= £500 pa
Gas certificate = £65 pa
etc etc

Add allowances (2640+ 500 +65 + etc etc)= £3205

Subtract from income (5500 - 3205) = 2295

Thus taxable profit is £2295

browneyedbazzi

Galeeno wrote: »

(I sent you a private massage Werdnal)

But if they don't need the tenancy details

then cant people give wrong figures in the tax declaration form for the buy to let?

and give HMRC wrong rental numbers, lower ones... to reduce their tax?

That's a bit like saying 'if you don't like someone who lives down the road, can't you just wait until no-one is looking and burn their house down?'

Yes, you can lie to HMRC ....but that comes with huge risks because if you get audited and it is found out you will almost certainly go to jail (deservedly so!). What you are talking about is tax evasion.

If it's something you're doing or thinking about doing then it's incredibly stupid to discuss it on an open internet forum. If you think the authorities can't/don't read online forums and aren't able to trace who made posts then you're wrong. If I was working for HMRC and read your posts I'd be sending off the paperwork to get your details released so that I could go through your finances with a fine tooth comb....I really hope that someone is doing just that and that if you are evading tax that you get the trip down the steps that you deserve.

theartfullodger

Galeeno wrote: »

(I sent you a private massage Werdnal)

But if they don't need the tenancy details

then cant people give wrong figures in the tax declaration form for the buy to let?

and give HMRC wrong rental numbers, lower ones... to reduce their tax?

Private massage as well eh??

Galeeno clearly you are asking for a "friend" who plans to defraud HMRC & decent honest tax payers by fiddling his tax. Hope he gets a VERY LARGE FINE!.

Of course you can lie to HMRC: As you can to your wife/husband/partner, the Police or the Judge...

Just grass the little crook up to HMRC fraud line..
http://www.hmrc.gov.uk/reportingfraud/

We don't want tax cheats in our fair country, and more than we want any other crooks or benefit cheats...

Hopefully the tenants/neighbours/acquaintances of this crook will have already advised HMRC.

Cheers!

Galeeno

browneyedbazzi wrote: »

If it's something you're doing or thinking about doing

No, nothing like that, and I agree tax cheats should be fined.

I like new tactics like in these stories, so that they can crack them down.

http://www.yourmortgage.co.uk/your-mortgage/news/2286979/tax-evasion-prosecutions-double-as-hmrc-eyes-middle-class

http://www.yourmortgage.co.uk/your-mortgage/news/2225835/hmrc-taskforce-to-tackle-buytolet-tax-cheats

shjo558

All UK councils have been forced (under a taxation law) to provide HMRC with a list of all landlords that they have paid Housing Benefit too along with the Property details, landlords contact details etc.