Reluctant landlords - do we need to self assess tax return?

igiveupjeez

My wife and I rent a property to a family member for £400 per month. (we also have running costs)
The property is in both our names and the rent is paid into a joint bank account.
The income is £4,800 per year less costs. If this income is shared between the two of us then it is less than £2,400 each.
Can any tax accountants confirm that we don't need to do a self assessment tax return. We are slightly worried and don't want to break any laws or face fines.
Thanks in advance

zagubov

Are you resident in the UK?

I'm not a tax accountant but have been a landlord a long time ago and I think you probably have to be prepared to register for self-assessment, despite the income looking modest.

Boat_to_Bolivia

I think if you make a profit of over £1,000, after taking into account maintenance/insurance etc, you will need to do a self assessment.

Jeremy535897

If you use the self assessment checker at https://www.gov.uk/check-if-you-need-tax-return and you get to the rental question, you only need to complete a self assessment tax return (because of being a landlord) if your gross rent is £10,000 or more, or your net rental income (ignoring finance costs) is £2,500 or more, so the existence of the rent does not, of itself, require you to complete a self assessment tax return. However, if you are liable for any tax on the income, you must declare the fact to HMRC. You might have a full time job, and your full personal allowance might be given against that job, so you would then owe tax on the net rental income. Tell HMRC, and the way it is normally dealt with is to reduce the allowances given against employment income by adjusting your tax code.

Jeremy535897

Boat_to_Bolivia said:

I think if you make a profit of over £1,000, after taking into account maintenance/insurance etc, you will need to do a self assessment.

I should correct a misconception here. Gross rent of £1,000 or less does not need to be declared, even if you complete a self assessment tax return for other reasons, because no tax is due (because of the £1,000 property allowance). You can't deduct both actual expenses and the £1,000 property allowance.

Boat_to_Bolivia

Jeremy535897 said:

Boat_to_Bolivia said:

I think if you make a profit of over £1,000, after taking into account maintenance/insurance etc, you will need to do a self assessment.

I should correct a misconception here. Gross rent of £1,000 or less does not need to be declared, even if you complete a self assessment tax return for other reasons, because no tax is due (because of the £1,000 property allowance). You can't deduct both actual expenses and the £1,000 property allowance.

That is not what I said! Try reading my post again.

Jeremy535897

Your post is not clear. If you make a profit of £1 after deducting allowable costs (whether actual costs or the £1,000 property allowance, not both), and your personal allowances are used elsewhere, you need to pay tax on that £1. You don't necessarily need to complete a self assessment tax return though, if the net rent is under £2,500, or the gross rent is under £10,000.

igiveupjeez

@Jeremy535897 Thanks for the comments. As the property is owned in our joint names and the rent is paid into a joint account do you think we will be OK to split the income between the two of us or will HMRC regard it as income for one person?

igiveupjeez

@Boat_to_Bolivia also thanks for your comments. I checked the government website and it says if the rental income is under £2,500 then you don't need to do a self assessment but you do need to do notify HMRC. I would post the link to the website but I'm still a newbie.

Jeremy535897

igiveupjeez said:

@Jeremy535897 Thanks for the comments. As the property is owned in our joint names and the rent is paid into a joint account do you think we will be OK to split the income between the two of us or will HMRC regard it as income for one person?

If the property is owned jointly between you, that is how the rent is assessed, whatever bank account it is paid into. It is assessed 50:50, unless you own the property unequally as tenants in common, and have made an election using Form 17 to have the income assessed unequally.

macman

Why 'reluctant landlord'? No one compelled you to rent the property.