Tax on Rental Property

Stewboy1978

Morning

I lived in a 1 Bed flat until April 06 - At this point I rented the flat out.

Rent I was recieveing was £418 per month. Mortgage was £505 per month.

Both my wife and I are employed and pay income tax through our companies so we have never had to fill out a tax form.

Do we have to declare this to the tax man? The flat is currently empty (Since Dec) as we are selling.

Thanks.

fengirl_2

Yes, you need to decalre it and you only have until 31 Jaqn uary this year to do it for the period April 06 to April 07.
You need to go to your local tax office and ask for a self assessment form for 07 together with the land and property pages for both of you.
You also need to contact your lends to ask for a certificate of interest paid on the mortgage for the year ended 5 April 2007. Only the interest shown on this certificate will be allowable for tax.
Then, you need to add up all the rents received, enter it on the SA and enter all the other expenses in the boxes provided - you just show your half shares on your own returns.
It doesnt sound as if any tax will actually be due, but get help if you are not sure.

jimmo

If you have made a profit you have to declare it as fengirl says. If the mortgage interest during the period the flat was let actually exceeded your rental income then you don’t really need to contact the taxman.
As pointed out by fengirl it is only the mortgage interest that is allowable not the total paid to the mortgage lender.
You will have made losses and they are no use to you. They can only be carried forward to set against future profits from the same rental business.
Assuming the flat is the only property you have rented your rental business ceased when the tenants moved out.
If you start letting again in the future that will be a different rental business and you will not be able to claim relief for the losses.
There’s really no point in going to all the bother of making a Self Assessment Return when there is no tax to pay.
See this for confirmation that the losses cannot be carried forward after the rental business has ceased.
http://www.hmrc.gov.uk/manuals/pimmanual/PIM4210.htm

elliveny

Saw this thread and it is similar to my own situation, though my rental income exceeds my mortgage interest payments and so I am concerned about how to declare this to the taxman and how to ensure that I am both playing by the rules and using them to reduce my tax liability as much as possible, so I'm hopeful that you will be able to help me.

With mortgage interest of £700 monthly and a rental income of £1000, in gross terms, I'm making about £300 per month. There are deductions from this though; I pay for a company to look after the let and so I have a 'management fee' deduction of about £50 per month, plus I incurred a bunch of expenses at the beginning of the let (contract fees, inventory costs etc.). My mortgage company also charged me to allow me to let the property (a one-off £100 fee plus I needed to have the house value reassessed at a cost of about £60). Also I have to pay for 'landlords' insurance on the property plus some occassional maintenance costs.

I am renting another property while the house I'm paying a mortgage on is being let and I wonder whether this would work in my favour?

I'm confused about the comment in an earlier posting 'you just show your half shares on your own returns' - how does this work? My wife works part time and so I am thinking that any property income would be best considered as her income rather than mine (I work full time) - is this allowed?

Lots of questions! As you can see, I'm am rather in the dark about all this and I'd appreciate any guidance on how to declare this situation to the taxman.

Thanks!