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BackOfficeGroup


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Property income
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I have a potential client who now rents out their flat, thus producing rental income.

The question is do they have to register with HMRC as self-employed and pay Class 2 NI or do they just complete the SA tax return for the specific year, as property income is classed as investment income and any losses cannot be claimed against other income.

Cheers.

P

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Mary


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They need to inform HMRC that are renting out their flat and they will be issued with a UTR and tax return to complete. As renting a property is not a trade, they do not have to register as self-employed and won't have to pay Class 2 NIC's. If they make a loss this can be carried forward to future years to be set against any profits. As you say it can't be offset against other income.

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BackOfficeGroup


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Thats what I thought, thanks for your quick response.

P

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Hopeful


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I have just found this link for property rental income, Can anybody tell me when they fill in the SA do they have to include all income or just that from rental? I.E if a person is an employee and their tax is deducted at source do they still need to fill in the employment section on the SA, can they also include any pension contributions paid?

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BackOfficeGroup


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If you need to complete an SA then you need to enter all income, as this may have an effect on the tax charged, on the various different pages of the tax return itself.

You would include pension contributions that you have made net plus the tax claimed at source, but not those paid by your employer. There are also limits to the amount you can claim, so I would check first.

P

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Hopeful


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Thanks P I came across this forum a few months ago I think it's great what a find.

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Hopeful


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Actually just out of morbid curiosity what about people how rent property they are still paying a morgage on?

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BackOfficeGroup


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??

If you have rental income and don't have a mortgage, then you are very lucky!! The mortgage interest is an allowable expense against the income, but not the capital repayment part, if you have a repayment mortgage, which I would hope they would have.

I hope that answered your question, as I didnt really undertsand it?!

P

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Hopeful


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Yes it did thank you

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lor


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this post is interesting as I have a client who owns rental property, are you saying only the interest charged on top of the mortgage (repayment part) in that tax can be claimed, also which box would it go in?.

Thanks for your help!.

-- Edited by lor on Monday 13th of December 2010 01:44:51 PM

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RobH


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That's right Lorraine, only the interest is considered revenue and so that is all that can be claimed. This of course is the same for any loans/hp for self employed clients, the capital part is just repaying the original loan snd would be a balance sheet entry, whereas the interest would be allowable in the P&L.

Rob

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Rob
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BackOfficeGroup


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And I agree with Rob.

As to which box, it depends on which type of income you have - holiday lets will go in box 7, buy to lets for example box 24.

P

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lor


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thank u, it is for a buy to let.

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lor


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The mortgage is in fact an interest only mortgage, therefore meaning the whole amount will go through, it looked like a large amount, but then I know the area it's very expensive!.

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