This HMRC campaign started back in 2013. I remember it starting because it was about the time a client approached me. They didn’t realise that they had to pay tax on renting out their old home.
Move forward five years and it is still ongoing. A lot of the campaigns close after a few years, but this one is going strong. In fact, we have come across clients recently who have been prompted by HMRC Let Property Campaign letters. So they are actively pursuing leads.
Do I need to report my rental income, it isn’t a lot and I didn’t rent for long?
If you rent out any property, whether it be furnished or unfurnished, whether it be in the UK or overseas, whether it be your own home, whether it be for a very short period at a high rent or a very long period at a low rent, you need to consider whether you have to report the income to HMRC. Whatever the reason or circumstances, if you receive any monies from renting out any property, you need to check whether you need to notify HMRC about that income.
The fact that you may not make much money from renting does not mean that you don’t have to report it. The fact that your mortgage repayment is more than the rental income may not necessarily mean you have no tax liability. On the positive side though, there are expenses that can be deducted from your rental income and you may find that your eventual tax liability is not as bad as you thought it would be.
Although there are some special tax rules for Furnished Holiday Lettings, the rental income is still reportable and the profits taxable.
How many years do I need to notify?
You may need to notify HMRC of 4, 6 or possibly 20 years of income, depending on the facts.
Will there be interest and penalties to pay?
If you notify HMRC without being prompted the possible penalty charges are easier to reduce. Some clients have not been charged any penalties, but there is no guarantee of that. There may also be interest to pay on any outstanding tax liability. The longer you wait to deal with this the more interest that will accrue.
If you are prompted by HMRC, it is not voluntary and you are more likely to face penalties. They will consider whether you have a reasonable excuse for not notifying them, whether you have been careless or whether it was deliberate. The more co-operative you are with them at that stage, the more likely you can reduce that penalty charge.
If you would like to get your tax affairs up to date, before you are contacted or if you have received a letter from HMRC, please get in touch with us. Holden Tax Consulting can help you to deal with this once and for all and get your tax affairs in order.