Receiving Rental Income: Should You Be Completing A Tax Return?
Rental income does have to be disclosed to HM Revenue and Customs but whether or not you have to complete a tax return to disclose the income will depend on your circumstances.
You will not need to complete a tax return if:
- The gross rental income is below £10,000 per annum, and
- The net rents you receive after expenses are less than £2,500, and
- You have no other taxable income
In these circumstances you merely need to report the income to HMRC.
If your income falls outside the above limits you will need to register for self assessment and complete tax returns.
For those landlords who have not realised that they should be reporting this income, HMRC have launched a let property campaign which will provide the opportunity to bring your affairs up to date and get the best possible terms to pay the tax you owe. This facility is not available to companies or trusts.
There are various expenses you can claim against the rental income, e.g. repairs, mortgage interest, rates, insurance…the list is extensive. The position for repairs is complex as HMRC only allow repairs which are classed as a revenue expense as opposed to capital, for example where a repair is actually a refurbishment or an improvement.
Should you require further information please do not hesitate to contact Green & Co
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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Any landlords with undeclared rental income, for whatever reasons or circumstances, should come forward and make a voluntary disclosure under the Let Property campaign to secure favourable terms. Those that do not face much higher penalties and even a criminal prosecution.