Paying tax on my rent?

rob9287

Hello,

I have had my house rented out for just over a year now. I have not told the bank I am renting (dont see why its a concern to them all they want is more £ off me to move onto a buy-let). I have an agent handling my property as im always away with my job.

I tried looking on HM revenue website as i wanted to pay the tax on the earning but TBH it was all jargon and i was going to Afghanistan in a number of weeks so it wasnt high priority.

Im now back from the desert and i want to know how i go about to pay tax. My parents say not to bother as i wont flag up on the system as im already a tax payer. But what if i dont get this issue resolved and all of a sudden i own X amount to them. When i was in Afghan a TA soldier was a tax man and he said if i register self employed il be off the radar but i cant remember as I suddenly left to go somewhere else.

Any advice, i want to pay tax! But of course if i can wing it i will.(Like everyone else would)

*Please dont lecture me that im dodging tax. Iv done 4 OP tours for this country and paid tax since i was 16.

jamesd

You'll find that you are breaching your mortgage terms and conditions by letting out the property without telling them. Telling them isn't optional, it's required by the contract you have with them.

You are entitled to deduct the interest part of the mortgage payment from your taxable rental income. You can also deduct a range of upkeep costs that maintain it but don't improve it. If you don't tell HMRC you'll end up unnecessarily paying a lot of income tax that you could have avoided. The cost of an accountant who is familiar with BTL and who can sort it all out for you is also a deductible expense. So save yourself the hassle and get the accountant to do the work and explain to you just how much tax you can save by doing it properly.

If HMRC find out later you'd owe all back tax, penalties and interest.

Gonzo1987

You have to tell your lender as a condition of the mortgage. Your EA should have asked if there was a mortgage on the property and proof you can let it.

If you're in the forces I'm pretty sure there a different tax forms to fill in for letting out property. I can give you this info for sure tomorrow.

rob9287

At the moment im not paying anything on my rent. I did ask my agent and they said its up to you to sort it all out. But like i said i was thinking of my Afghan deployment at the time so sorting my tax was at the bottom of my list.

But now im back i want to get this sorted and to pay tax as one day there sting me with a bill. I take it its 20% of the money minus the interest?

G_M

If your mortgage lender finds out
* they could call in the mortgage ie make you pay it off in full, by selling unless you have access to loads of cash! or
* put you on a BTL mortgage and charge you retrospectively for the extra payments you should have made

Yes, you might be 'off the radar' and get away without telling them, but banks do make checks esp if they know you work abroad, or, god forbid, if a disgruntled tenant informs them.....

Out of interest, what address does the bank use when writing to you? Your prents or somewhere else? Bit of a give-away for the bank! Or the property? What if the tenant sends the post back marked "not residing here"?

Again HMRC similar advice. You may be off the radar, but HMRC also check up, and there are various ways they can find out (or be told: see fraud reporting). If they think you deliberately kept quiet to avoid paying, they'll not just claim the back tax, but fine you too.

As for how to pay. Either employ an accountant at a nominal costs (tax deductable!) or DIY.

Make a list of all the deductable expences. See my link below and go to the HMRC website for what is deductable. Then declare the rental income, subtract the deductable amount, and pay tax on the 'profit'.

[FONT=&quot]New Landlords[/FONT][FONT=&quot] (information for new or prospective landlords)[/FONT]

[FONT=&quot]Letting Agents [/FONT][FONT=&quot](Tips for selecting, and tips for sacking them)[/FONT]

jamesd

It starts out at (rent - interest ) * 20% But there are other deductions you can make. Costs of finding new tenants, say. It's worth spending a couple of hundred Pounds for an accountant to sort it out for you if you don't know the rules.

Thrugelmir

rob9287 wrote: »

*Please dont lecture me that im dodging tax. Iv done 4 OP tours for this country and paid tax since i was 16.

HMRC formed a unit last September with the sole aim of targeting those that let property and don't declare the income.

I have no interest in whether you declare the income or not , nor whether you tell your lender. However the downside is totally yours. HMRC penalties can mount rapidly , and lenders do and will blacklist borrowers. Your call whether it's worth the risk.

Smi1er

The two biggest issues you have of immediate concern is


1/ If you have any Gas appliances then you need Gas Safety certificates. Renewable every 12 months.


2/ Tell your insurance company as you're currently not insured!!

rob9287

I phoned the bank and said can I change my address. As i was going to Afghan. I get my mum to open all my mail. Iv got landlord insurance on my property that i let out. My house is empty end of this month as they are moving to a bigger house.

But i do want to get this sorted now im back.

So my agent fees and gas servicing will all be tax deducted? Il have a look in the yellow pages when im home to find an accountant.

BlaEm

Have you considered getting a consent to let? I know with Natwest if you've owned a property for 2+ years they're usually pretty relaxed about giving a consent to let, particularly as your occupation means that periods overseas are highly likely.

The consent only costs around £100, much cheaper than a BTL and probably safer to do if you continue to rent going forward than hoping that your mortgage provider doesn't cotton on and insist on a BTL mortgage.

As for the tax return, there are a lot of things you can deduct - maybe from now have all rental payments made in to a separate bank account and make all repairs, maintenance, agency costs etc come from there so it's easier to reconcile at the end of the tax year. But speak to an accountant, it's a good investment to make sure you're covering yourself.

jamesd

Yes, agent fees and the gas servicing (legal requirement) and energy performance certificate (legal requirement for new letting) costs are all expenses that you can deduct from the rental income. You've been missing a lot of tricks that can save you money.