Tax on rental

seven-day-weekend

You have to add ALL  your income up from all sources and how much tax you pay is based on that, but you can set things off against your rental income, such as interest, ground rent, insurances etc.

caprikid1

how long have you been renting it out ? you will be exposed to capital gains tax if it actually goes up in value.

theartfullodger

theartfullodger said:

Do I conclude correctly you pay £350/month on an interest only mortgage but only get £350/month rent, please?  (I have interest only mortgage on a rental property costing £232/month but rent is over £1,000.... Yes, Proudhon was right)

If so sounds like rent is rather cheap, way below market rate?

Please note HMRC may decide to tax you on market rent rather than which is received.  (Not obviously in your case, but I'm sure you can see the possible fiddle some rogue landlords use....)

Is tenant a relative and/or would they like to claim housing related benefits?

When was property 1st rented out by you please?

col81 answered some questions in a P..M...  Col81 please answer fully in this thread so everyone can help you!!

IMHO you are running big risks which may result in significant financial & other pain.

Time to be (as all decent folk are ) fully open with HMRC!! Today I 'umbly suggest.

Best wishes to everyone.

Artful, OaP, on the usual 6 benefits old people get..... but also a ....  landlord.

col81

i am a 20% tax payer, i have rented it out to a elderly relative to help them for 18 years. It seems me helping someone has made me a huge hole. I bought it for 70k and it is worth 150k i remortaged and owe 120k on it. the payment has been as high as 750 per month in the past and i have paid the 400 difference with the 350 income. nightmare

csgohan4

I commend your reason to rent at a low rent, which i suspect they may not afford market rates. But being a LL your not a charity, you need to ensure your finances are in order and can cover the basics, which is mortgage and maintenance. 

If it  doesn't it is not a viable business. 

You need to make some hard decisions now and in the future. Money and family never really mixes and this why I will never rent to relatives if I had the opportunity to do so

I assume you have been filing tax returns on your income, if not, your going to be in for a shock with HMRC

col81

Why am I in for a shock all calculations tell me I should pay £0 as I'm at a monthly loss massively

theartfullodger

Is relo getting free 'bus pass, free eye tests, winter fuel allowance, free prescriptions, £10 Xmas bonus, state pension? What private pensions or savings does he have please?

Are you and he aware of pension credit?

Suggest you contact an accountant specialising in residential landlords, and contact HMRC very soon afterwards.

Start collecting all records of income and expenditure on this tenancy.  ASAP!

Do mortgage lender and your landlord insurance (you do have) know of the below market rent and that tenant is a relative please?

Hope you have significant savings.

sheramber

col81 said:

Why am I in for a shock all calculations tell me I should pay £0 as I'm at a monthly loss massively

What you calculate as income less expenses may not be correct. Not all expenditure may be an allowable expense.

Without knowing all the figures of income and expenditure  and what that expenditure is for, plus details of all your other income, no one can tell you how much tax you will pay.

HMRC do not allow you to say that you are not due to pay any tax. You need to submit your figures for them to  calculate whether any tax is due or not.

csgohan4

theartfullodger said:

Is relo getting free 'bus pass, free eye tests, winter fuel allowance, free prescriptions, £10 Xmas bonus, state pension? What private pensions or savings does he have please?

Are you and he aware of pension credit?

Suggest you contact an accountant specialising in residential landlords, and contact HMRC very soon afterwards.

Start collecting all records of income and expenditure on this tenancy.  ASAP!

Do mortgage lender and your landlord insurance (you do have) know of the below market rent and that tenant is a relative please?

Hope you have significant savings.

OP above is a good post on what you need to do

there is more to Letting than mortgage and rent. Tax and legal responsibilities. Do you have electric and gas inspection done? Tenancy agreement ? deposit protected where relevant

You will likely need an accountant, but it won't be cheap, having to go through 18 years of records. Expect that will eat into your capital even more. Failing to file returns for rent will also incur penalties from the HMRC which are not insignificant. 

AdrianC

OP - what have you submitted on your self-assessment tax return in the past?