If you rent out a property, it is imperative that the rental income is declared to HMRC on your self-assessment tax returns.
This applies even if you do not make a profit on the rental of your property, perhaps because your mortgage payments and expenditure are higher than the rental income.
In fact, if you are making a loss on your property income, we would be keen for you to prepare your rental accounts to include within your self assessment tax return and ensure that any losses are registered with HMRC to be available for use in the future against rental profits.
When you have rental income and expenditure, there are specific rules that make the preparation of your rental accounts and self assessment tax return not such a simple matter as you might envisage.
One instance is the replacement of any of the equipment such as a fridge or a freezer. The rules for calculating the rental profit mean that the full cost of the replacement may not be allowable as a deduction and so this needs careful consideration.
Another instance of a specific rules is this – any mortgage interest on the loan cannot be deducted from the rental income to create a net profit that is then taxable. The mortgage interest is given as a tax credit at the basic rate of tax within your tax calculation. If you are a higher rate taxpayer, this can often result in tax being payable on your rental income even though in your belief, you haven’t actually made a meaningful profit.
At ajftaxation, when preparing your rental property accounts, we take the opportunity of reviewing your tax position for any tax planning opportunities that will help to minimise your tax liabilities.
Registering your rental income with HMRC
If you need help with registering your rental income with HMRC, we are very keen to assist with this.
Late notification of rental income to HMRC and disclosure of rental income after a number of years
If you’ve received rental income for a while and have not yet declared with this HMRC, then don’t stress, the situation can be rectified. It’s not an ideal situation and of course it would have been necessary to declare this income to HMRC within the required time limits. However, we have experience in disclosing this source of income with HMRC, in the best possible light to minimise any tax liabilities and penalties that might apply on the late notification of rental income.
If this scenario applies to you, please don’t hesitate to get in touch and we can help take the worry away.
