HM Revenue & Custom - Rental Questionnaire

HM Revenue & Custom - Rental Questionnaire

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Bebs

Original Poster:

2,917 posts

287 months

Thursday 12th August 2010
quotequote all
I recently let a property out and HM Revenue & Custom have sent me a Rental questionnaire, I assume because the agent has informed them of the rental contract.
What % will I pay £ wise to HM customs - is it a fixed percentage of the net profit from the rental?
Also, before letting the property I undertook a major refurbishment of some £6000. New heating system, pipes, boiler and a complete redecoration etc. Is this something that can be deducted against the net profit?

Many thanks for your input chaps.

scotal

8,751 posts

285 months

Thursday 12th August 2010
quotequote all
Bebs said:
I recently let a property out and HM Revenue & Custom have sent me a Rental questionnaire, I assume because the agent has informed them of the rental contract.
What % will I pay £ wise to HM customs - is it a fixed percentage of the net profit from the rental?
Also, before letting the property I undertook a major refurbishment of some £6000. New heating system, pipes, boiler and a complete redecoration etc. Is this something that can be deducted against the net profit?

Many thanks for your input chaps.
Assuming its resi property, then you should be able to offset the refurb costs againsts your rental income.
You can also offset the interest on any mortgage on the property against the rental income.
You cannot set any capital part of the mortgage payment off.

You'll be taxed at your highest rate on any remaining income.

Eric Mc

122,688 posts

271 months

Thursday 12th August 2010
quotequote all
Blimey - fancy going into the Rental business without finding how the tax system works regarding rental income. It amazes me sometimes.

Anyway, to answer your question, you pay Income Tax on your Rental Profits arising in each tax year (which ends on 5th April each year).

The rental profit is computed by deducting from the Gross Rents received from the tenants the allowable Rental Costs.

Rental Costs are -

Repairs and Maintenance of the property

Insurance on the property

Maintenance costs on the property

Council tax and water charges incurred by the landlord

Interest charges on loans taken out to buy the property

Replacement costs of furniture if a "Furnished Let".
Alternatively, for Furnished Lets, a straight 10% Wear and Tear allowance can be claimed instead of the actual repl;acement costs. The 10% is calculated on the Gross Rents less Council Tax and Water Charges

Management Charges - if using an agent, these will be the charges paid to the agent. If managing the property yourself, then you can claim your own management costs against the rental income - such as mileage or travel and accomodation costs incurred in looking after the property, collecting rents, visiting solicitors/accountants/banks etc.

If your property generates a loss in any given tax year, you will not (obviously) have any taxable rental income that year. The loss can be carried forward for offset against future rental profits. The losses CANNOT be offset against other taxable income (such as a PAYE Salary) in the same tax year the rental loss was incurred.

The rules are different for Holiday Lets - although these are currently in a bit of a state of flux at the moment as the new Government dithers(which is something they seem to be very good at) over what to do with the taxation of Holiday Lets.


Deva Link

26,934 posts

251 months

Thursday 12th August 2010
quotequote all
Eric Mc said:
The losses CANNOT be offset against other taxable income (such as a PAYE Salary) in the same tax year the rental loss was incurred.
Can they be offset in other years?

Eric Mc

122,688 posts

271 months

Thursday 12th August 2010
quotequote all
Only in future years and only against rental income.

Deva Link

26,934 posts

251 months

Thursday 12th August 2010
quotequote all
Thanks.

Bebs

Original Poster:

2,917 posts

287 months

Thursday 12th August 2010
quotequote all
Thank you for your detailed reply Eric. Much appreciated.

Wings

5,838 posts

221 months

Thursday 12th August 2010
quotequote all
Bebs said:
Thank you for your detailed reply Eric. Much appreciated.
Yes another brilliant reply by Eric, but also consider if your partner's name is also on the title deeds, sharing some of the rental income/profit in their name, since if you are paying on income the higher tax rate of tax, then the same will also apply on the rental/investment income.

Eric Mc

122,688 posts

271 months

Thursday 12th August 2010
quotequote all
Good point. Spreading the income over two or more individuals is always useful - if possible.