Common Misconceptions About Tax and Letting Property
HMRC has published a list of popular misconceptions that taxpayers have about letting property. We have listed below a summary of situations where you will need to declare rental earnings to HMRC:
- If you inherit property and let it out.
- If you buy a property as an investment and let it out.
- Divorcing partners, who decide to let out their jointly owned property, will need to declare their share of any rental profits on their individual tax returns.
- You may move to a new house due to employment considerations and let out the house you are moving from.
- You may move into a care home and let out your present home to help pay for the fees.
- You may buy a property for your son or daughter to use while at university, and they may sub-let to friends on an informal basis and charge a nominal rent, which you use to defray costs. Any surplus monies received from this sort of arrangement will still need to be declared.
- Moving to tied accommodation can create problems if you keep your existing home and let it out. If the rents you receive cover your mortgage repayments (capital and interest) you may consider that you have not made a profit, but the capital part of your mortgage repayments are not an allowable deduction for income tax purposes.
Also, watch out for the effects of the changes to the rules for repairs and finance costs (interest) that we have covered in recent issues.
If you are concerned that you may be required to declare your rental income, and you have not yet done so, we can help. There is a tried and tested process to bring matters up-to-date. Please call for more information.