Rental income tax return - self assessment v PAYE and unequal shares in property

rachieb77

My fiance and I started renting out our former home in September 2012 and I'm aware we need to complete a tax return for 6 April 2012 - 5 April 2013 (so the rental period 16 Sep 2012 - 5 April 2013) by 31 Jan.

We're probably going to have around £1500 of profit after allowable deductions but we anticipate it will be significantly more than this for the current tax year as we have converted the house into a HMO and are receiving approx. double the amount of rent.

My questions are:

1. My fiance and I own the rental property on a 60/40 split as he put the deposit down. We have a document which shows the split. Do we therefore have to complete and return a HMRC Form 17 to declare the property is held in inequal shares (and does this have to be before 31 Jan)?
2. When I called HMRC, the adviser said that as the profit was under the £10,000 gross profit/£2,500 net profit thresholds for this tax year, my partner (who has not yet registered for self-assessment) could pay his split of the tax by PAYE. Is this correct?
3. I had already registered for online self-assessment back in October. The HMRC adviser was unclear about whether I could elect to pay my split of the tax by PAYE as well or if I had to fill out a self-assessment form as I had aready registered. Can anyone clarify this?
4. If I do have to complete the online self-assessment form, where do I provide the information that clarifies we own the house on a 60/40 split, so that I don't end up paying all the tax? I can't seem to find this when I've looked. And how will HMRC know to tally my return and my fiance's payment through PAYE together?

Thanks in advance.

purdyoaten

Form 17 is only appropriate for married or civil partnership couples.

Returns where a request is made to have the underpayment coded through PAYE had to be submitted by 30th December 2013 for 2012/13.

On the return you only declare YOUR SHARE of the property income and expenses.

rachieb77

purdyoaten wrote: »

Form 17 is only appropriate for married or civil partnership couples.

Returns where a request is made to have the underpayment coded through PAYE had to be submitted by 30th December 2013 for 2012/13.

On the return you only declare YOUR SHARE of the property income and expenses.

Thanks for the reply. So we don't need to complete a form to state that we own the property in unequal shares? I just put 40% of the income and 40% of the expenses in my return and my fiance does the same but for 60%?

In section 4 (Details for UK Property), it asks "Do you have any income from property let jointly?" and I've selected "Yes". The guidance states: If you own and let property jointly with one or more other people, include only your share of the income and your share of the expenses. Please enter the name and address of the person who prepares the property records in the 'Any other information' box on your Tax Return.

So would the "Any other information" box be where I'd clarify that I am only liable for 40% of the tax and also where I'd provide my partners' details so that HMRC can link-up the two separate SA returns for the property?

00ec25

rachieb77 wrote: »

Thanks for the reply. So we don't need to complete a form to state that we own the property in unequal shares?

you submit the Form 17 after you get married. You do not do it before marriage as your tax return explains the basis of your income share. Incidentally as you are not (yet) married you do not have to stick with a 60/40 "actual" split. You could use whatever split you want, but once married you must use the actual split via the Form 17

rachieb77 wrote: »

So would the "Any other information" box be where I'd clarify that I am only liable for 40% of the tax and also where I'd provide my partners' details so that HMRC can link-up the two separate SA returns for the property?

yes

purdyoaten

Your first paragraph is correct.

Personally I would not be providing any more information than is required. I would enter the name and address (not tax info) of your fiance (if he keeps the records). I would not bother to tell HMRC the split unless they ask for it. Tell HMRC now that it is anything other than 50:50 increases the likelihood of a query, at least in my opinion.

Just for clarification, although I am sure that you know- you are liable for tax on 40% of the income, not liable for 40% of the tax.

rachieb77

Thank you so much for clarifying - that's really helpful.

The HMRC adviser didn't tell me that the PAYE deadline had passed, so I'm going to get my fiance to register for SA tonight so that we don't miss the deadline!

Might get an accountant involved for the 2013/14 tax year as it's going to be more complicated in terms of allowable deductions and future capital gains deductions due to all the HMO work.

anselld

00ec25 wrote: »

, but once married you must use the actual split via the Form 17

Once married there is still a choice. Submit the form 17 and use the actual split or do not submit the form and use 50:50.

silvercar

Might get an accountant involved for the 2013/14 tax year as it's going to be more complicated in terms of allowable deductions and future capital gains deductions due to all the HMO work.

CGT only occurs on sale. Keep all receipts for work done.