Fines for self assessment on rental income

csgohan4

OP you need to get professional help from an accountant as you fail to understand the basic tax liability for letting and selling a property which is not her primary residence.


Ignorance is not an excuse and the HMRC has seen this all the time and will chase you if you do not settle your liabilities in a timely manner.


OP why did you think you had no tax to pay? Profit or no profit, you still need to file accounts for the BTL


If it wasn't a business why did you receive rent and not give it out for free?


OP we are here to help and provide guidance and tell what it is in reality and we are not here to sugar coat it and say your right and HMRC are wrong which is not the case here.


Get professional help before the Fines keep racking up as you are liable for interest every day the liabilities are not settled

AdrianC

anxiouscharlie wrote: »

We did not have a “residential lettings business”

Yes, you did. Whether you admit it or try to pretend it was something else.

in fact the irony is we didn’t make any profit at all. We barely broke even.

So it wasn't a very good business... Many aren't.

We had no choice but to let the property out due to personal circumstances.

Yes, you did. You had other choices. You just preferred the potential income stream of letting to selling or leaving it empty.

You didn't wake up one morning and find that you suddenly had a spare house with a signed tenancy agreement, and think "Blimey, what happened there?" - you deliberately prepared that property for going on the lettings market, searched for and found a tenant, and then completed (at least some of) the legals.

We did not set out to abuse the system!!

Nobody said you did. "Accidental landlords" never do. They just end up in trouble through failing to do their basic research. And "what do I need to do about tax?" is fairly high on the list of things you need to do.

The very first "straight" result on google for "rent house income tax" is...
https://www.gov.uk/renting-out-a-property/paying-tax

I don’t know what CGT means.

Capital Gains Tax.

And we sold the house in Feb 2018.

So within the 2017-18 tax year. You don't need to declare anything on your 2018-19 SA returns. Any CGT liability should have been declared on 2017-18, too, as well as the income for the year.

00ec25

anxiouscharlie wrote: »

We did not have a “residential lettings business”, in fact the irony is we didn’t make any profit at all. We barely broke even. We had no choice but to let the property out due to personal circumstances. We did not set out to abuse the system!!

I don’t know what CGT means. And we sold the house in Feb 2018.

Dazed and confused:

There is no 2018-2019 self assessment to fill out, we sold the house in February 2018.

Please elaborate regarding mortgage interest against rental income.

What I am stating is that surely we can’t go from £100 to £700 without any prior warning or it is fair that it’s been 18 months since the “first offence” without any acknowledgment by the HMRC whatsoever?

I am sorry about employment situation, but prepare for worse news. yes you can go from £100 to £700 and you need to act NOW because that is not the end of the increase, if you are more than 6 months late the automatic penalty increases to £1,500 - you are currently on the £750 step (3-6 months late), it will double again if you do not act NOW

I appreciate you say you notified HMRC but it is also clear you did not really understand your position or positively get them to send confirmation of your "agreed" understanding

you were letting a property, that means you were running a lettings business. Don't quibble over wording because that is exactly how HMRC regard you - in business to make money for yourself and therefore responsible for declaring your tax position yourself

HMRC are aware you let property. HMRC are also aware you have sold a property, but you have failed to declare that sale and thus failed to account for the Capital Gains Tax that may (or may not) be due on the money from that sale

you have received late filing penalties. You can scream as much as you like about never having received any notification, but the fact remains they send out both a notice to file a tax return (around May time each year) and the penalty letters when you are late. Yes they may have missed one, or it got lost, but you will never prove that and they won't accept that over 2 years you missed everything. was the tax code actually adjusted? if not, did you not wonder why there was no tax being paid?

You claim you "made no money" - however, without having done a tax return that is just a typical statement from amateur landlords who have not understood what they are doing. The fact the cash received may not have been more that the costs you paid does not mean you have no "profit" upon which tax is due

For mortgages you can only claim the interest paid, so if you have a repayment mortgage only part of the payment is tax deductible. The "capital" element is not because that is part of your increasing wealth and will be taxed under CGT when you sell. Also note the interest restriction is explained here, it may well apply to you if it pushes her into the higher band (and yes that is possible even if she was a basic rate taxpayer in her job):
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

bit late now, but you may benefit from actually learning how tax on rental income works:
http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html

if your costs are less than £1,000 you may want to claim the property rental business allowance instead ? (though I doubt your costs are that low)
https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

as for CGT, if the property sold was once your GF's main home (ie. before she moved in with you) then see here for how to calculate the CGT liability. Don't ignore it, it will be spotted eventually!
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

babyblade41

As the last 3 postings above... Tomorrow make it priority to get advice on how to proceed... ignoring it like you have done will get worse

Don't ever underestimate HMRC , they won't listen to job loss or any other reason you think you may have they only deal in figures.

I always had a big firm of accountants and yes they were expensive but they saved me from sleepless nights and when the inspector came to call unannounced he dealt with them as I don't have a clue when it comes to tax and all it's laws

My business was quite large and F/T but even one house out for rental is still a small business and should be dealt with like any other.

You say you barely broke even ...well now you were trading at a loss... too late now but you can try and accept damage limitation ... but do it now ... 6 months down the line and it will get a lot worse, then they come knocking very loudly

My OH had a small garage years ago and then done some S/E work... he found HMRC really helpful filling out his tax return and could actually make an appt to assist him in person

Try this tomorrow.. y

Mobile_hell

I got fined for not knowing I needed to send a form in even though I hadn't earned enough to be liable for tax. I had been employed for years and never had a form, left my employment, didn't get a form, didn't even know the SA form existed, they made me pay the fine, small amount each month even though I still didn't earn enough to pay tax. Make an offer of what she can afford, because they will hound her for years and increase the debt with high interest till she agrees to pay.

anxiouscharlie

Wow some of you are really helpful on this forum...others just seem to be using it as an excuse to berate me and make me feel ten times worse than we do already.

Getting an accountant is something we have spoken about today. I cannot work out taxes and percentages and interests.

There are no capital gains tax as she only let it out for 18 months and it was her primary residence for 10 years before this.

I’m thinking it probably wasn’t the right forum for this, thanks to those of you that were understanding.

AdrianC

anxiouscharlie wrote: »

others just seem to be using it as an excuse to berate me and make me feel ten times worse than we do already.

I suspect you mean me - and that's absolutely not what I'm doing.

Your first step to getting out of this pickle is understanding how you got here. If you can't or won't step back and do that, then you are still heading into trouble with the taxman, not away from it.

I wish you all the best - and we are here to help you - but you need to understand what and how and why you are here, and you need to accept that it is not HMRC's problem. If your OH contacts them and tries to make out they're the wronged party, then HMRC will not be interested.

gary83

I think it probably was the right forum for you but the timing was wrong, it's a shame you didn't find it before you rented out your property maybe it could have saved some expensive mistakes.

You asked a question and generally got the right advice, nobody can wave a magic wand and make your tax liability disappear, as far as HMRC are concerned ignorance is no excuse, good luck with the accountant and getting it all straightened out

00ec25

anxiouscharlie wrote: »

There are no capital gains tax as she only let it out for 18 months and it was her primary residence for 10 years before this.

ok, but she will nonetheless need to declare the sale on her tax return so make sure you tell the accountant about it

why? Because HMRC require you to do a tax return and where that is the case you are additionally required to report any property sale worth more than 4x the CGT exempt amount (approx 46k) even if there is no tax to pay. Leave it off the tax return and she could get into trouble for mis-reporting

theartfullodger

Pleased that HMRC are chasing up more people who have been avoiding/evading tax, knowingly or not. Shame more resource isn't put into it.

My old dad considered an essential part of patriotism was ensuring you paid tax:. So much more important than shouting at the Tele etc etc etc.

Best wishes to all.