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    • Debster1616
    • By Debster1616 9th Apr 18, 6:59 PM
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    Debster1616
    Tax credits and declaring rental income
    • #1
    • 9th Apr 18, 6:59 PM
    Tax credits and declaring rental income 9th Apr 18 at 6:59 PM
    I wanted advice regarding claiming tax credits and being a landlord who is receiving rental income.....
    various phone calls to the tax credits helpline give conflicitng information. Some agents tell me its the total rental income that needs to be delcared to tax credits. Other agents say you can deduct all expenses such as maintenance, insurance and even mortgage interest. Another agent has told me today that only essential maintenance can be deducted (no insurance or mortgage interest).
    There are no guides on the GOV.UK website to help either. Just says property income must be declared with no specific notes on it.
    Please can anyone advise what it correct?
    Thanks
Page 1
    • Darksparkle
    • By Darksparkle 9th Apr 18, 7:06 PM
    • 5,051 Posts
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    Darksparkle
    • #2
    • 9th Apr 18, 7:06 PM
    • #2
    • 9th Apr 18, 7:06 PM
    https://www.gov.uk/hmrc-internal-manuals/tax-credits-technical-manual/tctm04006
    Last edited by Darksparkle; 09-04-2018 at 7:09 PM.
    • sheramber
    • By sheramber 9th Apr 18, 7:14 PM
    • 4,674 Posts
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    sheramber
    • #3
    • 9th Apr 18, 7:14 PM
    • #3
    • 9th Apr 18, 7:14 PM
    https://www.gov.uk/hmrc-internal-manuals/tax-credits-technical-manual/tctm04006

    Post 6 April 2017

    Following changes to tax legislation, the way a person!!!8217;s income tax liability is calculated in respect of their rental income no longer reflects that used for the purposes of tax credits.

    When calculating their income tax liability a person will only be able to include a percentage of their finance costs (e.g. mortgage interest) as an allowable expense. The percentage rate will decrease over a period of four years until no relief will be available from 2020/21. These rates will be applied as follows:

    2017/18 75%

    2018/19 50%

    2019/20 25%

    2020/21 Nil

    For the purposes of tax credits, a person will still be able to deduct 100% of their finance costs when calculating their allowable expenses for property income.
    • Debster1616
    • By Debster1616 9th Apr 18, 8:58 PM
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    Debster1616
    • #4
    • 9th Apr 18, 8:58 PM
    • #4
    • 9th Apr 18, 8:58 PM
    Many thanks for this information. It!!!8217;s really helpful. I still cannot believe the advice the tax credits advisers are giving out! It!!!8217;s completely incorrect. I have printed out the online chat I had with the advisor in which they tell me I cannot deduct mortgage interest. Good job I didn!!!8217;t take their word for it!
    • Darksparkle
    • By Darksparkle 9th Apr 18, 9:15 PM
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    Darksparkle
    • #5
    • 9th Apr 18, 9:15 PM
    • #5
    • 9th Apr 18, 9:15 PM
    They aren't tax trained for the most part which has always been an issue. Do you not complete a self assessment?
    • Dazed and confused
    • By Dazed and confused 9th Apr 18, 9:25 PM
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    Dazed and confused
    • #6
    • 9th Apr 18, 9:25 PM
    • #6
    • 9th Apr 18, 9:25 PM
    They aren't tax trained for the most part which has always been an issue

    Doesn't that make it even worse? If they only know about tax credits and not income tax then they should at least know the rules for tax credits?
    • Darksparkle
    • By Darksparkle 9th Apr 18, 9:39 PM
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    Darksparkle
    • #7
    • 9th Apr 18, 9:39 PM
    • #7
    • 9th Apr 18, 9:39 PM
    They aren't tax trained for the most part which has always been an issue

    Doesn't that make it even worse? If they only know about tax credits and not income tax then they should at least know the rules for tax credits?
    Originally posted by Dazed and confused
    As I said, it's always been an issue. But as the links show, the rules are the income tax rules and tax credit follows those. There is plenty of help available to understand those rules and notes available for completing SA. There's only a slight change in relation to tax credits which only came in 2017.
    • Debster1616
    • By Debster1616 9th Apr 18, 10:08 PM
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    Debster1616
    • #8
    • 9th Apr 18, 10:08 PM
    • #8
    • 9th Apr 18, 10:08 PM
    They aren't tax trained for the most part which has always been an issue. Do you not complete a self assessment?
    Originally posted by Darksparkle
    Yes I do an online self assessment also for my rental property. I find this has a lot more help as I’m going through each section and examples of what is allowable as deductions. The online tax credits page doesn’t even have a field for ‘other income’. You have to ring up the helpline to get it added which can be a long long wait!
    • Debster1616
    • By Debster1616 9th Apr 18, 10:11 PM
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    Debster1616
    • #9
    • 9th Apr 18, 10:11 PM
    • #9
    • 9th Apr 18, 10:11 PM
    Are other expenses like landlords insurance and repairs allowed to be deducted before you submit a rental income figure to tax credits? I now understand that mortgage interest is deductible...
    • Darksparkle
    • By Darksparkle 10th Apr 18, 6:15 AM
    • 5,051 Posts
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    Darksparkle
    Are other expenses like landlords insurance and repairs allowed to be deducted before you submit a rental income figure to tax credits? I now understand that mortgage interest is deductible...
    Originally posted by Debster1616
    Did you read the links we posted?
    • Debster1616
    • By Debster1616 10th Apr 18, 8:25 AM
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    Debster1616
    I couldn’t find any mention about insurance and maintenance expenses. Only the link took me to information about mortgage interest
    • Darksparkle
    • By Darksparkle 10th Apr 18, 8:33 AM
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    Darksparkle
    As per the link:

    Deductions in computing profits from Property Income
    Generally, expenses can be deducted as long as they are allowable expenses for income tax.
    • sheramber
    • By sheramber 10th Apr 18, 9:55 PM
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    sheramber
    As I said, it's always been an issue. But as the links show, the rules are the income tax rules and tax credit follows those. There is plenty of help available to understand those rules and notes available for completing SA. There's only a slight change in relation to tax credits which only came in 2017.
    Originally posted by Darksparkle
    But as the links show, the rules are the income tax rules and tax credit follows those.


    No they don't as the first sentence explains
    Following changes to tax legislation, the way a person!!!8217;s income tax liability is calculated in respect of their rental income no longer reflects that used for the purposes of tax credits.
    • Darksparkle
    • By Darksparkle 11th Apr 18, 6:07 AM
    • 5,051 Posts
    • 3,287 Thanks
    Darksparkle
    But as the links show, the rules are the income tax rules and tax credit follows those.


    No they don't as the first sentence explains
    Following changes to tax legislation, the way a person!!!8217;s income tax liability is calculated in respect of their rental income no longer reflects that used for the purposes of tax credits.
    Originally posted by sheramber
    Eh yeah, that's why I said there was a change in 2017 if you read the full post and had already posted the link to show this before you had.

    The only difference between tax credits and income tax is how mortgage interest is dealt with. All other deductions are as per the income tax rules.
    • sheramber
    • By sheramber 11th Apr 18, 1:07 PM
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    sheramber
    The finance coasts can be more than mortgage interest.

    It would include interest on loans to buy furnishings and fees incurred on taking out loans or a mortgage
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