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The buy to let property market is still booming despite the credit crunch. More people are turning to rent as they wait to see which direction house prices will move in. As a result there is as large a demand as ever for rental properties.
People are also being pushed into renting out their properties, as it’s growing increasingly difficult for them to sell before buying their new home. They’re joining the growing group of taxpayers dubbed the “accidental landlords”.
Despite the route you take in becoming a landlord you still have responsibilities, not least of all to the taxman. HMRC are beginning to take a hard line on those landlords they see as evading tax by not declaring this extra income. Millions of pounds in tax revenue are going unpaid and in these tough times that doesn’t please the government.
This is an excuse often used and one that just won’t wash with HMRC. It’s your responsibility to make the tax authorities aware that you receive any form of income that isn’t taxable. You need to tell them about this income that you receive and request that they issue you a tax return. This may be a strange concept for many to grasp but failure to do so could result in late submission fines, penalties for undeclared tax and interest, which will run from the date the tax was due.
The tax you will pay on your property income will be based on the profit you make. To calculate this “taxable profit” you start with your income and you deduct from this any relevant expenditure during the year. The main cost for most will be mortgage interest. It’s important to note that only the interest element of the loan repayments are a tax deductible expense. You don’t get any credit for just repaying the money you have borrowed.
Other types of expenses which qualify for tax relief are repair and redecoration and any utilities, service charges and ground rents payable when the property was let.
There are many other things that need to be taken into account when preparing the profit statement, for more information contact us about our fixed fee landlord tax return service.
