Question about self assessment tax return

Jaguar_Skills

Hi all,

I recently was auto enrolled with my company pension. Being a HRT payer the documentation states that to reclaim the additional rate of tax relief I will need to fill in a self assessment tax return. Prior to this, and despite having a private pension, I have never done this since I have always just phoned up HMRC to tell them of my pension contributions, and they have adjusted my tax code accordingly.

Another factor to take into consideration is that I have just been gifted 50% of my girlfriends flat which is currently BTL (as we live in the house we just bought). This has been done on the basis of me relieving her of a sizeable debt in relation to our house that we bought, and therefore everything moving forward will be in a 50:50 split.

My question relates to the self assessment tax return.

1) Do I need to fill one of these in now?

2) Does this need to include the BTL flat?

3) Do I need to take tax/financial advise?

4) Do I have to have an accountant fill this the form in for me? If it makes any difference, my girlfriend has her own limited company that she takes dividends from and therefore the accountant deals with this for her.

Any advice is much appreciated.

booksurr

1 it depends if your share of the rental income is more than £2,500. If it is you must do SA, if it isn't you can argue with HMRC on the phone to get your tax code adjusted. But the liability is then on you to make sure you declare the correct figures every year so not under or over payment occurs. Given you are a HR taxpayer that may be just as time consuming as doing SA in the first place (eg: mortgage interest rules changes for HR tax!)

as to when to do it depends if your rental income started before April 2016. If it did then its in 15/16 obviously and needs to be declared by the 31 Jan 2017 deadline (you can do earlier!)

2. as above, yes if > 2,500. Read: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

3. advice on what? Pension planning? Whether BTL is a "good" thing for you to do? You certainly need to learn about tax on BTL if your GF is not already up to date on higher rate taxpayer implications so cannot advise you herself.

4. depends how competent you are dealing with your own affairs. A tax return is just a form with boxes in which you put numbers in accordance with the copious guidance notes readily available in many places

Jaguar_Skills

Thanks for your reply. In answer to your questions:

1) The rental income purely pays off the mortgage. There is only like £5 or £10 profit per month. Because I am a RT but my gf isnt (she pays low tax because of dividends through her company) does the negatively affect her?

2) Noted

3) Would an IFA be best person to speak to?

4) I will try to get to grips with it myself first but I do think beacuse of our situation detailed tax advice may be beneficial.

Wayne_O_Mac

Jaguar_Skills wrote: »

Another factor to take into consideration is that I have just been gifted 50% of my girlfriends flat which is currently BTL (as we live in the house we just bought).

Just to be clear, your girlfriend lived in the flat before it was let out, right? Because if not, she may end with a capital gains charge.

Jaguar_Skills

Yes she did. Only for a couple of years.

Brighty

Jaguar_Skills wrote: »

Thanks for your reply. In answer to your questions:

1) The rental income purely pays off the mortgage. There is only like £5 or £10 profit per month. Because I am a RT but my gf isnt (she pays low tax because of dividends through her company) does the negatively affect her?

2) Noted

3) Would an IFA be best person to speak to?

4) I will try to get to grips with it myself first but I do think beacuse of our situation detailed tax advice may be beneficial.

Remember that it's only the mortgage interest that you can offset against the rent, not the repayment part. So even though you may only be £5-10 a month up after the mortgage is paid, your taxable profit will be higher

Brighty

Jaguar_Skills

Brighty wrote: »

Remember that it's only the mortgage interest that you can offset against the rent, not the repayment part. So even though you may only be £5-10 a month up after the mortgage is paid, your taxable profit will be higher

Brighty

So is the profit the total rental income?

£885 x 12 months? = £10,620

[Deleted User]

The income is £10620.

The profit is £10620 less expenses which includes:

mortgage INTEREST (you need to establish the interest paid in the year)
rates
ground rent
repairs
wear and tear allowance (if furnished and you have not chosen the renewals alternative)
agency fees
etc etc

booksurr

Jaguar_Skills wrote: »

So is the profit the total rental income?

£885 x 12 months? = £10,620

no it is not

this is very basic stuff, start with:
https://www.gov.uk/renting-out-a-property/paying-tax

on that link there are fundamental issues, there is a key difference between your profit figure and your income figure and the tax (and tax return) implications are different for both of those figures:

1. You ... must pay tax on the profit you make from renting out the property, after deductions for ‘allowable expenses’. Allowable expenses are things you need to spend money on in the day-to-day running of the property, like.....

2. You must report income if it’s:
£2,500 to £9,999 after allowable expenses
£10,000 or more before allowable expenses
If it’s less than £2,500 a year, call the Self Assessment Helpline.

silvercar

Your GF could have a CGT liability, depending on how long she lived in the flat before letting it out. On giving you a half share she created a disposal in CGT terms.

Jaguar_Skills

How long does she have to live there for the CGT not to kick in? It was rented out on a friendly basis before ie no BTL mortgage so there wouldn't be any evidence she wasnt living there?