tax and houses and stuff

[darve]

All non-financial issues aside………………..

 

It doesn’t matter whether you are making a profit or not, the income/expenditure needs to go on your tax return.

 

The earnings you have received under the PAYE system will go in the employment income section of the tax return. This will then result in a tax liability. However, the “tax deducted at source” as seen on your payslips will reduce the liability to nil and there will then be no tax payable.

 

The rental income you have received goes under the property income section of the tax return. The rent receivable (whether paid up to date or not) goes in the income box. All expenditure “wholly and exclusively” as a result of the rental income can then be included in the expenditure box. Note, this will only include the interest element of the mortgage payment if it is a repayment mortgage. The mortgage company can give you this information easily. It sounds like there will be a loss which can then be carried forward and offset against future property income profits. The loss cannot be used to reduce the employment income liability. You will use 50% of the income/expenditure figures, assuming you jointly owned the house 50:50.

 

All other income received will also need to be included on the return. E.g. bank interest (goes in the investment income section of the return).

 

All of the above will be for the period April to March.

 

The return has to be filed online by 31 January following the tax year. E.g. 11/12 return has to be filed by 31 Jan 2013. If deadline missed, £100 penalty.

 

I won’t bother with failure of payments penalties, as it sounds like you won’t have a liability.

 

Usual disclaimer, don’t rely on what I’ve said, and seek independent professional advice etc etc.

[dombanks]

ok so ive been to see a "man" who specialises in tax from rental properties like mine and dealing with this exact issue.

 

its pretty simple for me may be of help for others,

 

stephen thanks for the offer and thanks for everyones input who have in one way or another said it all but i didnt quite get it.

 

i wount need to do any kind of form/tax return etc as i am unlikely to earn enough from it. in fact by the time ive taken the deducatbles (mortgage interest, managment fees, insurances etc) im probably not even going to break even and if i do make anything it will be below the 2.5K celing HRMC have set where they will want me to do a self assesment (but this isnt an investment its my house that i cant sell on as i cant refinance the mortgage and cant "take the hit" getting out of it as the numbers are too much)

 

what i (and the ex who also owns 1/2 of it) will have to do is inform HMRC in writing that we have this income and its below their threashold. Give them a breakdown of it all and then see what they say. which is likely to be nothing as i (we) will be totally below it. Apparently HMRC are fine to deal with the low value things like this via correspondance. this all needs be done about april time and for the princly sum of £120 i can even pay the nice man to deal with it all for me.