Let property matters
Having an income from property is more and more common, whether you’ve kept a property you owned before moving in to share with a partner, an inheritance or a planned investment, it’s residual income and, therefore, most of it taxable!
Let Property Campaign
If you have a buy-to-let (BTL) residential property owned as an individual, have you declared the income to HMRC on your personal tax return. Often clients believe the income is within their personal allowance where they have no other sources of income and no income tax will need to be paid on this income.
HMRC have access to land registry records and can see where individuals own more than one property. We have seen an increasing number of nudge letters to taxpayers from HMRC asking if they have income to report to them.
If you believe you may have rental income to report, there is a mechanism known as the Let Property Campaign.
This is an amnesty by HMRC which allows taxpayers to inform HMRC of rental income and any income tax liability on this income and HMRC will levy lower penalties for any undeclared tax.
Please reach out to us so we can assist you in the process of determining whether you need to register under the Let Property Campaign with HMRC and bring your tax affairs up to date.
Rent a room relief
If you rent a room, fully-furnished, in your main residence, you can earn up to £7,500 (£3,750 each if you jointly own your home with someone else). If you earn less than this, tax exemption is automatic. If you earn more, you must opt into the Rent-a-Room scheme on your self-assessment tax return.
There are two options to calculate your tax – Actual Profit, where you pay tax on your rental income, less actual expenses and costs. This is the HMRC default. The other method is Gross Receipts, where you pay tax on your total income – less the £7,500 tax free allowance. No other expenses can be offset in this situation – and you must advice HMRC that you want to apply this option.
60 Day reporting for Capital Gains Tax
We are seeing more people receiving nudge letters from HMRC in relation to the 60 day reporting requirements for the sale of residential BTL property.
If you sell a residential BTL property, you have 60 days from the date of completion to inform HMRC of any gain and pay the tax on this.
The 60 day reporting requirement is not required in the following circumstances;
- You are selling a property that is your main residence
- The property sold was sold at a capital loss
- You sell a commercial property
- The buy to let residential property is owned by a limited company
The gain is also reported on your self-assessment tax return, depending on your other income received in the tax year, you may have either a small Capital Gains tax balance owing to HMRC or overpayment due back from them. The 60 day reporting for the sale of residential buy to let property also includes trustees. If a residential buy to let property is held in a trust, as a trustee you need to report the gain to HMRC and pay any tax within 60 days of the completion date on the property.
