Here Lee explains a few points about the rules on declaring ALL rental income to avoid any fines or penalties and to reduce the risk of getting investigated by the taxman.
If you have a property that you rent out to a tenant who isn’t a family member then you have to declare the information to HMRC; EVEN IF YOU ARE NOT MAKING ANY MONEY FROM IT!
Quite often we hear, when talking about rental properties, “you don’t need my rental info because I don’t make any profit on it”, this is incorrect.
Just because your mortgage costs more per month than the rent your tenant pays you does not technically mean you are running at a loss. With regards to your mortgage we can only use the mortgage interest as an expense to offset, so for example:
Rental income £500 per month
Mortgage £600 per month
From your point of view you are running at a loss of £100 per month
However, if the mortgage is £300 repayment and £300 interest then,
in the view of HRMC, you have a profit of £200 per month.
Even if you are running at a loss it still has to be declared to HMRC in your tax returns. Losses can be carried forward so if you do in one year have rental profit, previous years losses can be offset against that profit.
If you have any queries on this, or need something explaining then please don’t hesitate to contact me or one of my colleagues and we will do our best to help you out.