rental income tax

lukekelly19

I am renting a flat and thinking of just charging expenses (c. £2,500 pa for ground rent and service charge) and the £1,000 tax-free allowance.

1. can you have both expenses and the tax free allowance?

2. do I need to declare and fill in the tax return if I just charge expenses + £1,000?

chrisw

No, you can't claim expenses and the allowance. It's one or the other.

lukekelly19

Thanks Chris!
And if I just charged expenses, and not a penny more, would I still need to declare?

TheSpectator

lukekelly19 said:

Thanks Chris!
And if I just charged expenses, and not a penny more, would I still need to declare?

What is the rental income, do you have any other income?

Bookworm105

lukekelly19 said:

I am renting a flat and thinking of just charging expenses (c. £2,500 pa for ground rent and service charge) and the £1,000 tax-free allowance.

1. can you have both expenses and the tax free allowance?

2. do I need to declare and fill in the tax return if I just charge expenses + £1,000?

did it cross your mind to read the instructions on when and how to compete a tax return?

Self Assessment tax returns: Who must send a tax return - GOV.UK

Check if you need to send a Self Assessment tax return - GOV.UK

Tax-free allowances on property and trading income - GOV.UK

theartfullodger

If you only charge rent of a low amount HMRC are likely to assess as market rent.  Sorry.  Appreciate you're not planning any tax fiddle but there's an obvious tax fiddle of tenancy agreement saying low rent ( wink ..) but actually cash exchanges for a higher rent but less than market.

Good luck!

Bookworm105

theartfullodger said:

If you only charge rent of a low amount HMRC are likely to assess as market rent.  Sorry.  Appreciate you're not planning any tax fiddle but there's an obvious tax fiddle of tenancy agreement saying low rent ( wink ..) but actually cash exchanges for a higher rent but less than market.

Good luck!

I know you like to sail close to the wind in your answers but what do you offer to support your claim?
Undeclared cash payments have no impact on tax liability of low rent although as you imply it may flag for review of your lifestyle in relation to declared income - highly unlikely for any one individual to be caught by that .

tax position is capped at no profit no loss where rent is not at a "commercial" rate
PIM2130 - Deductions: main types of expense: properties not let at a commercial rent - HMRC internal manual - GOV.UK

Letting a property at less than market rent - Makesworth Accountants

lukekelly19

TheSpectator said:

lukekelly19 said:

Thanks Chris!
And if I just charged expenses, and not a penny more, would I still need to declare?

What is the rental income, do you have any other income?

I have a salary.

I would just charge the cost of expenses (service charge + ground rent) because the tenant is family. So there would be no tax. But just wondering if I'd need to declare and do the self-assessment for that, or could just not declare?

 The end result would be the same I guess - 0 tax - but I'd not have the fuss of the tax return.

theartfullodger

HMRC have the power to charge rent at market rent.  Fully appreciate you're straight but easy to see how others could have an easy fiddle 

HMRC also v suspicious of rent to family.  There is a common view of many landlords, including me, never rent to/from friends or family.  And mortgage lenders and insurers often refuse or have hard conditions for family rentals.  Beware!

Buy a book on property tax (there are more than 10 taxes a landlord may pay.  ). Cheaper in time & £££ than the alternative  (ignorance).  Beware CGT so get some valuations before you start and file them.

km1500

Just to be clear there is no tax problem letting out your property for any figure you like, including a sum substantially less than market rent. HMRC cannot and will not enforce the rent you charge

However they may limit the amount of expenses you can claim if the rent is below market value


This may help

https://www.property-tax-portal.co.uk/letting-property-below-a-market-rental-the-tax-implications.shtml

https://www.taxinsider.co.uk/renting-property-to-connected-people-below-market-value

saajan_12

theartfullodger said:

HMRC have the power to charge rent at market rent.  Fully appreciate you're straight but easy to see how others could have an easy fiddle 

HMRC also v suspicious of rent to family.  There is a common view of many landlords, including me, never rent to/from friends or family.  And mortgage lenders and insurers often refuse or have hard conditions for family rentals.  Beware!

Buy a book on property tax (there are more than 10 taxes a landlord may pay.  ). Cheaper in time & £££ than the alternative  (ignorance).  Beware CGT so get some valuations before you start and file them.

what on earth does this bold part mean? HMRC do not charge rent to random tenants. If you mean that they would tax you on a higher amount, where do you get this from? If they think you're lying (eg by declaring a lower rental amount and having the tenant 'gift' you money, then that's different they may well tax you on the actual rent you're total rent they think you're receiving, but they don't go around taxing you on INCOME you haven't actually received (its different for other taxes such as capital gains).