Tax On Rental Income

newbutold

Hi

I am about to register for self assessment as I understand that even if no tax due, it still needs to be declared, but in the meantime can anybody tell me what tax I can expect to pay if any? Is rental income classed differently to income from a job?

I am a housewife, therefore I have no income and pay no tax so have my full personal allowance available.

I own outright a house which I rent out, before any deductions for costs I incur like British Gas cover, repairs and landlord insurance, I should receive £7800 in rent per year. I do not run this as a business or class it as my job, (in fact I didn’t intend to end up a landlord but that’s another story), I did pay the additional stamp duty for owing a second property when I bought this one.

Based on this information will I be liable for any income tax or will it fall within my personal tax allowance? Am I also correct in thinking that as I’m not running it as a business, I won’t need to pay any NIC?

I did attempt to register today but lost the will being on hold!

Many thanks

Keep_pedalling

This is classed as running a business, but as your profits are well below your annual allowance and you have no other income then there will be no IT to pay. If your profits are over £6,365 then you will have To pay class 2 NI, which is currently £3 per week. Even if your profits are below that paying C2 NI is probably worth while to build your state pension.

Dazed_and_confused

Strictly you probably don't need to register but that then leaves you open to HMRC contacting you if they (when) they become aware of the rental income.

So simplest to register and complete a tax return even though no tax will be due.

I am a housewife

Even if you have applied for Marriage Allowance your Personal Allowance will be £11,250 so of your gross annual rental income is £7,800 there will be no tax to pay (the rental profit is taxed in a similar fashion to employment income).

You don't need to pay NI but you may prefer to pay voluntarily depending on your contribution record and expectation of getting a State Retirement pension.

You don't need to phone them, there is an online option here,

https://www.gov.uk/government/publications/self-assessment-register-for-self-assessment-and-get-a-tax-return-sa1

Dazed_and_confused

On the information the op supplied I doubt this would be classified as a "business" in the sense that Class 2 or 4 National Insurance would be chargeable.

newbutold

Thank you for the above information. Going slightly off my original topic but maybe you could also help with the following...

..... Paying voluntary NI contributions was something I was going to look into next as I currently have a full record with no gaps in it, but the last few years have been covered by me claiming child benefit (only benefit I do claim), as my child is 11 I believe the ni credits stops when the child reaches 12 years old.

Therefore would me paying voluntary class 2 be the way to keep my record from having gaps and help me qualify for a state pension (if such thing still exists when I get there) I did look at class 3 but I think that is for filling gaps and I have no gaps?

I will try the link supplied for registering. Thanks again

00ec25

Keep_pedalling wrote: »

If your profits are over £6,365 then you will have To pay class 2 NI, which is currently £3 per week. Even if your profits are below that paying C2 NI is probably worth while to build your state pension.

no, you have misunderstood the subtle difference between running a property business and merely being the owner of a let property receiving rental income

only those who are actively trading are running a business, and would thus be subject to NI, since it is a tax on either employment or self employment and mere ownership of property is neither employment nor self employment.

in order to qualify as running a rental business she would need to:
a) own more than 1 property which is let
b) operate her letting business as a full time occupation in the same manner as a letting agency would do.
c) have a history of buying properties to let

Op fails on all 3

basics explained here:
https://www.gov.uk/renting-out-a-property/paying-tax

OP will need to read a lot more than that before she has a better understanding

given OP's circumstance of being a non earning "housewife" she cannot choose to pay class 2 NI since she has no liability for it. If she wants to accrue a state pension entitlement (and benefits such as SMP for example) she would need to pay the more expensive Class 3 voluntary NI contributions.
if you are not paying NI then by definition you have a gap and can fill via class 3, which you can pay monthly if you wish as explained on the page you probably read
https://www.gov.uk/pay-voluntary-class-3-national-insurance

Dazed_and_confused

Before doing anything regarding National Insurance I suggest you look at your State Pension forecast on gov.uk (you can see it on your Personal Tax Account if you have already signed up for that).

You should generally ignore the first figure as that usually just says your forecast is £168.60, the normal maximum.

It is the next figure, the amount you have built up so far (to either 5 April 2018 or 2019 at the moment) which is what matters. This will give you an idea of how many years you will need to get to the maximum.

Two other tips. Forget about references to 35 years. You are under transitional rules so could get to the maximum with less than 35 years. Or you might need many more.

If your forecast refers to a "COPE" amount you do not deduct that from your forecast.