rental income below £2500?

lesterxburnham

hey,
I calculated my rental income for 2017-2018 using HMRC examples: (https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies) :

I started renting my flat from September 2017 so figures for period 09/2017-03/2018 are:
rent - £3975
mortgage interest - £2301.33
building insurance - £248.48

so, I calculated my property profits as:
£3975 - (£2301.33 * 0.75) - £248.48 = £2000.5

I've got few questions regarding this:
1. does my calculation look correct?
2. should I include mortgage interest only for months that I rented the property out or for full tax year?
3. according to HMRC website, if property profits are between £1000 - £2500 then I need to get in touch with them to get tax collected through PAYE. In that case, when contacting HMRC, what else do I need apart from my calculation? Are they going to work out tax themselves based on calculation above? Do I need to send any supporting documents to them (like bank statements etc)?

00ec25

1. on the rather limited costs you have claimed, yes that calc is correct (ignoring your rounding error). Are you 100% certain that is interest only? Single biggest mistake people with a repayment mortgage make is not realising part of the payment is capital, and only some is allowable interest cost.

2. read the rules about when a letting business starts, and therefore what costs can be claimed for the period before it "started"

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505

no way can you claim an entire tax year's interest given the info you present in your post. Who was living in the property before Sept 17? If empty, what were you doing with it at that time?

3. depends what sort of HMRC numpty answers the phone. One who can think, or one who merely reads instructions to staff off the screen in front of them, but understands nothing.
However, to answer your question, no you do not send anything to them.

Tax is all about self assessment. You are expected to learn the rules and apply them accurately yourself (or employ an accountant with professional indemnity insurance who you sue if they get it wrong on your behalf). HMRC's role is to take you to the cleaners if they subsequently decide to inspect you and then find you at fault, because you are responsible for getting it right. They do not do it for you.

lesterxburnham

Thanks for the answer.

1. yes, I summed only interest part of my mortgage payments .e.g my monthly mortgage payment is about £550 of which about £300-£350 is interest - I summed only interest part from each month and multiplied that by 0.75. Is that correct?
2. I lived in the property before Sept 2017. Looking at link you've provided it doesn't look like I can claim any additional costs.
3. So, do they just take my info and adjust my tax code? or will I need to complete some additional forms?

lesterxburnham

can anyone shed some light on the questions above please?

00ec25

lesterxburnham wrote: »

can anyone shed some light on the questions above please?

are you unable to read?

1. YES
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

2. "Where the rental business is letting property, the business can’t begin until the first property is let."
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505

3.Property you personally own
The first £1,000 of your income from property rental is tax-free. This is your ‘property allowance’.

Contact HMRC if your income from property rental is between £1,000 and £2,500 a year.

You must report it on a Self Assessment tax return if it’s:

£2,500 to £9,999 after allowable expenses
£10,000 or more before allowable expenses
If you do not usually send a tax return, you need to register by 5 October following the tax year you had rental income.
https://www.gov.uk/renting-out-a-property/paying-tax

kleapatra

Unless you’ve already done it, you need to apportion that buildings insurance, I assume that £248.48 is for 12months, you need to multiply it by 7/12. And why have you multiplied the mortgage interest by 0.75? (It’s probably really obvious!)
I think you just have to fill in your tax return and there’s an option to tick ‘collect tax through PAYE code’, there’s no need to send in bank statements etc, HMRC will simply take the numbers you give them as fact.

00ec25

kleapatra wrote: »

And why have you multiplied the mortgage interest by 0.75? (It’s probably really obvious!)

it is beyond obvious to those who have mastered the ability to read links that have already been posted, but since that does not include you, please try again..
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

lesterxburnham

thanks for help 00ec25. no need to be rude though

kleapatra

00ec25 wrote: »

it is beyond obvious to those who have mastered the ability to read links that have already been posted, but since that does not include you, please try again..
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

Luckily for me however I have mastered the far more important skill of not being unnecessarily rude to other humans. Here's a link for you to read with those perfect reading skills you apparently have! https://www.skillsyouneed.com/ips/politeness.html