Tax returns when renting a property

Dave_Donaldson

10 years ago, I purchased a house using my retirement fund for my daughter to live in after her marriage broke down, and charge her rent at £5,000 per year.
As I'm retired, I haven't had any other income in that time (no benefits either), so the £5,000 income falls within my personal tax allowance, and therefore there is no tax to repay.
However, this year - 2021/22, I started receiving my State Pension, so that, plus the rental income means that I will owe income tax at the end of this tax year and intend to honestly declare it.
But, because I have not owed any income tax until now, I have never completed yearly tax returns (I didn't know that I had to until now!), but I'm sure HM Government will be none too pleased!!
My 10 yrs bank statements will prove that there has been no dishonesty, but I'm worried about the consequences of not submitting tax returns....
Any thoughts??

Dazed_and_C0nfused

Why do you think you had to complete them for the previous tax years?

Dave_Donaldson

Dazed_and_C0nfused said:

Why do you think you had to complete them for the previous tax years?

Because it says so here, am I misreading it?

Dazed_and_C0nfused

I would say this is a more reputable source.

The final two paragraphs are most relevant.

https://taxaid.org.uk/guides/information/an-introduction-to-income-tax-national-insurance-and-tax-credits/income-tax/it-is-your-responsibility-to-tell-hmrc-if-you-owe-income-tax

resk

Dave_Donaldson said:

My 10 yrs bank statements will prove that there has been no dishonesty

I'm not convinced bank statements have that power, to be honest with you.  Can I just clarify - you retired 10 or more years ago, and 10 years ago you bought a house for your daughter to live in, and during that 10 years you have had no other source of income apart from the rent she has paid?  If so then I think you'll be okay.  Just tell HMRC.  

chrisw

Tax returns are very specific to a particular year and wont ask why you have suddenly started filing a tax return. They will only ask for income, expenses and profit for that particular year and not ask about previous years {apart from carrying over losses).

As you really didn't owe any tax for those years, I would keep quiet and start filing and declaring correctly from now on. The chances of questions being asked about the missing previous years and anything bad happening is, I would say, negligible.

[Deleted User]

Dave_Donaldson said:

10 years ago, I purchased a house using my retirement fund for my daughter to live in after her marriage broke down, and charge her rent at £5,000 per year.
As I'm retired, I haven't had any other income in that time (no benefits either), so the £5,000 income falls within my personal tax allowance, and therefore there is no tax to repay.
However, this year - 2021/22, I started receiving my State Pension, so that, plus the rental income means that I will owe income tax at the end of this tax year and intend to honestly declare it.
But, because I have not owed any income tax until now, I have never completed yearly tax returns (I didn't know that I had to until now!), but I'm sure HM Government will be none too pleased!!
My 10 yrs bank statements will prove that there has been no dishonesty, but I'm worried about the consequences of not submitting tax returns....
Any thoughts??

Your 2021/22 tax return will specifically be for rental income received in the 2021/22 tax year.  There is still time to file your 2020/21 tax return as it’s not due until 31st October 2021 if you file a paper return or 31st January 2022 if you file it online. 

For the other 8 years you haven’t declared then HMRC has a Let Property Campaign for landlords such as yourself who have not declared rental income as income. 

https://letproperty.campaign.gov.uk/

Dazed_and_C0nfused

Lover_of_Lycra said:

Dave_Donaldson said:

10 years ago, I purchased a house using my retirement fund for my daughter to live in after her marriage broke down, and charge her rent at £5,000 per year.
As I'm retired, I haven't had any other income in that time (no benefits either), so the £5,000 income falls within my personal tax allowance, and therefore there is no tax to repay.
However, this year - 2021/22, I started receiving my State Pension, so that, plus the rental income means that I will owe income tax at the end of this tax year and intend to honestly declare it.
But, because I have not owed any income tax until now, I have never completed yearly tax returns (I didn't know that I had to until now!), but I'm sure HM Government will be none too pleased!!
My 10 yrs bank statements will prove that there has been no dishonesty, but I'm worried about the consequences of not submitting tax returns....
Any thoughts??

Your 2021/22 tax return will specifically be for rental income received in the 2021/22 tax year.  There is still time to file your 2020/21 tax return as it’s not due until 31st October 2021 if you file a paper return or 31st January 2022 if you file it online. 

For the other 8 years you haven’t declared then HMRC has a Let Property Campaign for landlords such as yourself who have not declared rental income as income. 

https://letproperty.campaign.gov.uk/

That is for people who owe tax on undisclosed property income so is of no relevance to the op.

As I'm retired, I haven't had any other income in that time (no benefits either), so the £5,000 income falls within my personal tax allowance, and therefore there is no tax to repay.

[Deleted User]

Dazed_and_C0nfused said:

Lover_of_Lycra said:

Dave_Donaldson said:

10 years ago, I purchased a house using my retirement fund for my daughter to live in after her marriage broke down, and charge her rent at £5,000 per year.
As I'm retired, I haven't had any other income in that time (no benefits either), so the £5,000 income falls within my personal tax allowance, and therefore there is no tax to repay.
However, this year - 2021/22, I started receiving my State Pension, so that, plus the rental income means that I will owe income tax at the end of this tax year and intend to honestly declare it.
But, because I have not owed any income tax until now, I have never completed yearly tax returns (I didn't know that I had to until now!), but I'm sure HM Government will be none too pleased!!
My 10 yrs bank statements will prove that there has been no dishonesty, but I'm worried about the consequences of not submitting tax returns....
Any thoughts??

Your 2021/22 tax return will specifically be for rental income received in the 2021/22 tax year.  There is still time to file your 2020/21 tax return as it’s not due until 31st October 2021 if you file a paper return or 31st January 2022 if you file it online. 

For the other 8 years you haven’t declared then HMRC has a Let Property Campaign for landlords such as yourself who have not declared rental income as income. 

https://letproperty.campaign.gov.uk/

That is for people who owe tax on undisclosed property income so is of no relevance to the op.

As I'm retired, I haven't had any other income in that time (no benefits either), so the £5,000 income falls within my personal tax allowance, and therefore there is no tax to repay.

It’s for individuals who have received rental income and failed to declare that income to HMRC. That would be the OP so is entirely relevant. Regardless of whether any tax would have due the OP should have been completing a tax return each year the property was let if after allowable expenses the rental income was more than £2500. 

Herbalus

I know somebody who was in the same position as the OP and simply started filing self assessment forms when tax was due. There was always a little doubt in my mind as I think technically self assessment was due even when no tax was payable, but nothing ever came of it. I can’t imagine hmrc being hard on it if they ever found out. 

theartfullodger

No benefits but retired?  So no winter fuel allowance , no £10 Xmas bonus?  No free prescriptions, no free 'bus pass, no free eye tests?

Being 73 I certainly recognise these as very valuable benefits - and obviously reflect the state pension in my tax return.

If you had been reporting rental income and ever made a loss you could have carried any losses forward to reduce future tax bill.

HMRC have the power to assess the true market value of the place and tax you accordingly.  Is/was the £5k always genuine market rent?

Got landlord insurance?  If not and eg place burns down you have a BIG problem.

STRONGLY suggest you do some training in how to be a Landlord, plus buy a book on property tax.  There are more than 10 taxes a landlord may and you need records, eg for CGT of purchase costs and any later improvements to reduce future CGT bill when you sell / depart this happy existence.