BTL - No tax return needed?

Beckyy

OH and I let out a jointly owned property for £375pcm.

Last tax year (our first) we let from July making £3375 excl April's rent. So £1687.50 each.

We have an IO BTL mortgage of £152.86pm, plus quite a few other normal expenses. Start ups like EPC, SAL membership and others such as SAL courses, tenant credit check fees , insurance etc.

When we first let it out I registered us both online with HMRC as now receiving income from property and we received letters at the end of the tax year telling us to returns were due.

I was intending to get it sorted in the next week or so, but having been preparing it seems that you only need to submit a return if you earn over £2500 from property?

As once income is split between us we do not, do I just call HMRC to tell them the exact figure and if so how do they take into account expenses etc. when calculating tax due? Is this taken through PAYE from our day jobs? Do I also need to provide details for interest on savings accounts etc.?

I earn basic £7.5k actual around £15K. OH basic £28K, actual £34k approx last year.

Apologies for the newbie questions and many thanks for taking the time to read.

Cardinal-Red

Hi,

If you ring them up and tell them your yearly profit is below the £2,500, they'll send you a form and then adjust your PAYE coding for your day job.

It doesn't sound like this will push either of you into the higher tax bracket, and so your interest will already have been taxed at source by the bank (assuming your interest is not so large as to also push you into the 40% bracket).

booksurr

you misunderstand and you are not alone - IMO that rule about 2,500 and rental income is one of the worst written sentences anywhere on HMRC website !!

Beckyy wrote: »

we received letters at the end of the tax year telling us to returns were due.

having been asked to submit a return (and therefore now "in" the system) if you do not you will be fined the automatic £100 penalty (each) for non submission

the 2,500 figure relates to how any tax due can be paid, it has nothing to do with whether you do or don't have to make a return. As above if the tax owed is less than 2,500 it can (at HMRC discretion) be collected via PAYE code adjustment, if more it can't and must be paid in cash. That has nothing at all to do with showing how you calculated the tax due figure, that is what the tax return does and is why they must have it since they have obviously decided not to accept a simple letter outlining the calculation instead (which they occasionally allow very simple cases to do rather than a tax return)

you have quite correctly informed HMRC that you have rental income. HMRC have chosen to require you to do a full blown tax return, until they tell you to stop doing so you have no option but to submit one (each as it is jointly owned - and you are married?)

Beckyy

Thank you for the replies.

booksurr wrote: »

(each as it is jointly owned - and you are married?)

Jointly owned, but we are not married.

I think that may have been my fault for registering for self-assessment as notifying them we were receiving income from property before I knew that we did not need to complete a return iirc.

I will give them a ring and ask if they would be happy to do it via the 'less than £2.5K/PAYE deductions' way - I really hope so as as I would be far more comfortable with that, it would take me quite a while to get to grips with the returns especially if they're not entirely necessary.

TheCyclingProgrammer

As booksurr says, your obligation is notify that you are chargeable to tax and in response, HMRC will normally ask for a tax return unless the income is under certain thresholds and you are already paid via PAYE in which case they will normally opt to collect the tax through your tax code.

If you voluntarily registered for self assessment and have subsequently received notices to file then you are obliged to submit one. You can try and speak to HMRC and see if they will withdraw that notice - explain that your net profit is under £2.5k and can they collect the tax through your tax code. If they do not withdraw the notice then I'm afraid you'll have to submit one.

What happens after that is that HMRC will either continue sending you notice to file each year or they may write to you to tell you that you no longer need to.

Filling out the return won't be particularly difficult but you will need to fill in an employment supplementary sheet with details from your P60s and any P11d if you have one. If you have received expense payments from your job, don't forget to apply for any relief you might be available if any (depends what the expenses were).

If you get stuck with the return I'm sure there are plenty of people on here who will be willing to help.

You haven't got long to submit a paper return but I'd recommend you both register for online filing.

Beckyy

I've just got off the phone to a very helpful lady at HMRC, who confirmed that because the income is below £2.5K we do not need to submit a self assessment. She said that we should calculate our expenses and call them back with a net figure. They will update our PAYE tax codes over the phones for last year, and should be able to input a rough figure for this tax year to correct the code.

I queried whether we still needed to submit the tax return as the letter states we are legally obligated and she said that because the income is below £2.5K and we have no other self-employed income she would apply to stop the self-assessment request. She said I would get written confirmation of this and it may take up to 4 weeks, however we would not be charged any fees if this went past the October deadline as they have been notified.

I have to get OH to call up himself to stop the self assessment side of things as I don't permission to deal with them on his behalf (yet)

Many thanks for your replies, they're much appreciated!. I can't fault the lady who I spoke to and it's quite a weight off my shoulders after getting in a muddle with it!

TheCyclingProgrammer

I was under the impression that HMRC were reluctant to withdraw notices to file so you've had a good result!

Don't worry about deadlines - the October 31st deadline is only for paper returns anyway. You've notified them about your income.

if you don't get it in writing from HMRC within a month, definitely chase them up so you have written confirmation that the notice to file has been withdrawn. Hopefully your OH will not have any issues.

Just remember that you'll need to keep HMRC informed about any increases or decreases in your rental income each year.