The reluctant landlord
With more and more people finding themselves unable to sell their current home before buying a new one, the scenario of letting out the old home can arise. In this situation (and if you do not already complete a tax return) the receipt of rental income will give rise to an obligation to notify HMRC accordingly, thereby leading to a Self Assessment Tax Return being issued for completion. The deadline for notifying of "chargeability" is 6 months from the end of the tax year, ie 5 October 2010 if rental income arose during the tax year ended 5 April 2010. It is also worth noting that if the property is held jointly then both parties have an obligation to notify HMRC.
It may well be that no overall profit arises from the letting but a notice of chargeability is still required. A common misconception we come up against is that mortgage payments are deductible. It is only mortgage interest which is deductible and therefore if you have a capital and repayment mortgage you must find out from your lender what interest is being paid so that the correct deduction can be made. Other expenses can be set against the rental income but this can be a complex area and specialist advice should be sought from an accountant or tax adviser.
With the 5 October 2010 notification of "chargeability" deadline rapidly approaching, for rental income arising last tax year, time is running out!
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The above is for general guidance only. Buick & Co Chartered Tax Advisers take no responsibility for this blog and its reliability. If any tax planning is to be undertaken specific advice should be sought beforehand from a professional tax advisor.