Letting a house out - do I need to tell HMRC

surfer_crx

This may seem like an odd question but I'm not having much luck getting a straight answer. My wife and I moved in together a few years ago, I couldn't sell my house at the time without making a huge loss so I decided to let it out. I haven't made a profit on it and it is worth no more now that it was when I moved out.


However I was told recently that I should still have informed HMRC, I contacted an accountant who told me that he could do me some tax returns at £180 per return, then I contacted the HMRC and spoke to someone on the let property campaign who said in a nutshell that if I haven't made money that I don't really need to let them know.


I tried another accountant earlier today but he was unable to give advice and honestly quite rude.


So I'm in a pickle, I'm quite happy to turn myself in as it were and take the penalties that come with it if there are any as I quite like to sleep at night and these things do concern me but I find it odd that an accountant would tell me that I should have declared it and been filling in tax returns and a person at HMRC would say that it wasn't an issue.


So I'm posting here as a last resort, can someone please offer me advice and/or point me in the direction of someone that can help.


Thanks in advance.

thesaint

I would write to the HMRC.
What we, or an account says is largely irrelevant.

HappyMJ

surfer_crx wrote: »

This may seem like an odd question but I'm not having much luck getting a straight answer. My wife and I moved in together a few years ago, I couldn't sell my house at the time without making a huge loss so I decided to let it out. I haven't made a profit on it and it is worth no more now that it was when I moved out.


However I was told recently that I should still have informed HMRC, I contacted an accountant who told me that he could do me some tax returns at £180 per return, then I contacted the HMRC and spoke to someone on the let property campaign who said in a nutshell that if I haven't made money that I don't really need to let them know.


I tried another accountant earlier today but he was unable to give advice and honestly quite rude.


So I'm in a pickle, I'm quite happy to turn myself in as it were and take the penalties that come with it if there are any as I quite like to sleep at night and these things do concern me but I find it odd that an accountant would tell me that I should have declared it and been filling in tax returns and a person at HMRC would say that it wasn't an issue.


So I'm posting here as a last resort, can someone please offer me advice and/or point me in the direction of someone that can help.


Thanks in advance.

You need to let them know.

Don't pay £180 to someone to fill out the self assessment for you. It is very easy. You add up the rent received and put that figure down. You add up all the "interest" charged on the mortgage (not the payment you make) and add anything you've spent on repairs and maintenance and put that figure down. You pay tax on the difference. Very very easy.

You can register online.

If you've not made any profit it's not a huge issue so don't worry about it too much.

theartfullodger

You need to submit tax returns or otherwise sort things with HMRC urgently as...
a) They can fine you loads if you don't ...
b) If you really did make a loss (only mortgage interest is a claimable expense, not the capital repayment element) then you can "carry forward" that loss and pay less tax in future when you make a profit. No tax return, no opportunity to pay less in future...

As saint suggest write (yes, WRITE! - keep copy) to HMRC. If they get to find out from someone else what's been going on they won;t be happy...

kingstreet

How have you established you haven't made a profit?

If you've allowed the whole mortgage payment on a repayment mortgage, you should have only allowed the interest.

There is a list of other allowable expenses. Are you sure you've treated the right expenses as allowable against income tax, as others may be allowable against capital gains tax when you sell?

booksurr

you are required to inform HMRC the minute you accept 1 penny in "rent"

you are required to calculate your net profit you make from your letting business and if that is a positive figure then you owe tax, if it is a negative figure then you have made a loss and should consider notifying HMRC of the loss so that you can use it in future to offset any profit you make in the future

if your profit is more than £2,500 you are required to register for self assessment and submit an annual tax return
if your profit is less than 2,5000 you are required to contact the HMRC helpline and they will decide how to treat you, eg: collect via an adjustment to your tax code (assuming you have PAYE earnings) or by lump sum on the basis you submit a written letter affirming your numbers or by putting you on SA anyway.

if you have genuinely made a loss (as stated by others it is the interest only which is allowable) then you are still required to inform HMRC that you have untaxed rent but that overall you have no taxable profit.

Please understand you are dealing with real people:
a) not all accountants are experts on personal tax and letting income so may not know anyway
b) not all accountants want to give one off advice or need new small fry clients so can't be bothered with you
c) HMRC call centre staff are call centre staff, their expertise on specific areas may be less than what you know yourself


use the internet to educate yourself ...
you have "income which is not automatically taxed so"....https://www.gov.uk/income-tax/how-you-pay-income-tax

you are "renting out" your property so .... https://www.gov.uk/renting-out-a-property/paying-tax

G_M

thesaint wrote: »

I would write to the HMRC.

Good luck with that. I've written 3 times in 6 months in relation to Inheritance Tax and just get ignored.......

* New landlords: advice, information & links

MoneySavingUser

Don't write to HMRC - get an accountant - if the ones you have tried aren't helpful try others. Most offer a free initial session.

You have probably made more money (for tax purposes) than you think as above only the mortgage interest is allowable from each payment (assuming it isn't interest-only)

HappyMJ

MoneySavingUser wrote: »

Don't write to HMRC - get an accountant - if the ones you have tried aren't helpful try others. Most offer a free initial session.

You have probably made more money (for tax purposes) than you think as above only the mortgage interest is allowable from each payment (assuming it isn't interest-only)

Why waste money on an accountant? The free initial session doesn't tell you anything it's just the accountant determining what you need and trying to sell his/her services by providing a quote.

Rental income and expenses are one of the easiest to figure out for yourself. There's no need for an accountant. Rent payments are easy to add up there's usually only 12 of them. Expenses are very easy to add up...the mortgage company may even tell you how much interest was charged in the tax year and all you've got to is add on repairs and maintenance and put that figure in the box on the self assessment.

swindiff

I pay £90 a year for my tax returns with regards to my rental property. Money well spent as far as I am concerned as it is a claimable expense against any tax liability I may have for that year.

HappyMJ

swindiff wrote: »

I pay £90 a year for my tax returns with regards to my rental property. Money well spent as far as I am concerned as it is a claimable expense against any tax liability I may have for that year.

This is how I do my taxes...

Rent £600/month times 12. Enter £7,200 as lettings income.
Look at bank statement add up all interest on loans secured on property. That's about £1,000. Enter that figure.
Look at receipts for repairs and maintenance add them up and enter that figure. That's also about £1,000. Done.
Pay tax on difference of £5,200. I earn under personal allowance so that's nothing.

I really can't understand why you'd waste £90 on an accountant when it's so easy to do yourself. When you're preparing your books for the accountant you've got all you need collated together so you may as well use that information get the calculator out and do it yourself. If you did forget to include a receipt in the bundle your accountant isn't going to claim for it. They can't make stuff up.

Even if you make a mistake yourself and don't realize for months it's easy enough to correct.