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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Please let me know if you can hep me? I need to know the best

Resolved Question:

Please let me know if you can hep me?
I need to know the best way to declare tax owed to HMRC on rental income, my tenant moved in late July 2010. I rented out my previous home when I relocated, instead of selling it and using the capital on a down payment for my current home, of which I use the rental income to pay my mortgage. I did not know at the time if the move would be long term as I moved from the South to the North of England where I had no family connections, only my 3 children.
I was not aware until recently that I had to declare the tax to HMRC as I pay tax for my full time job.
I am currently receiving £840 a month rent, on average the amount I pay out for the property is around £140 per month.
Can you also confirm if I will have to pay the full amount and if so, would I be able to make an arrangement with the HMRC to pay the outstanding tax arrears over a period of time via my full time wage.
I can also confirm that I have booked an appointment to see an accountant next week.
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience May I clarify that the rental income has been received consistently from July 2010 to date and you continue to receive rental income on the property please?Is the property in your sole name? Are you married?Is there a mortgage on the rental property?
Customer: replied 2 years ago.

Yes, I have received the income constantly. The property is in my previous marriage name only. Iam dviorced. There is no outstanding mortgage.

Expert:  Joshua replied 2 years ago.
Many thanks. The rent is liable to income tax at your individual rate - i.e. is taxed at the same rate as your salary / other income. Bear in mind it will be added to your existing salary and so dependent on how much you earn it could push you into a higher tax bracket but if it does it would only be for that amount that is over the allowance. An easy way to calculate the tax due for the last couple of tax years is to use a calculator such as:http://www.thesalarycalculator.co.uk/salary.php On this calculator you can just put in the rent in the "bonus" box. Remember that you will already have paid some of the tax shown by the calculator as due by the PAYE system so you can deduct what you have already paid from the total tax shown as due. If there has been a mortgage you can deduct the interest payments you have made from the rent before calculating tax due on the rent. You can also deduct any of the following from the rent you may have paid before caculating tax:letting agents’ feeslegal fees for lets of a year or less, or for renewing a lease for less than 50 yearsaccountants’ feesbuildings and contents insuranceinterest on property loansmaintenance and repairs to the property (but not improvements)utility bills, like gas, water and electricityrent, ground rent, service chargesCouncil Taxservices you pay for, like cleaning or gardeningother direct costs of letting the property, like phone calls, stationery and advertising You can tell HMRC about the undeclared income using a self assessment return which you can complete online.https://www.gov.uk/register-for-self-assessment It is likely that HMRC may assess a penalty for late filing of the self assessment form but the penalties should be at the lower end of the scale on the basis that you have informed them voluntarily rather than being caught for which the penalties are much higher. You can ask HMRC to pay your tax by instalments. It is up to HMRC whether to allow you to do so. They usually will not agree to long drawn out instalments but can be open to discussions on relatively short term arrangements. I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me I'd be very grateful
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Joshua and other Law Specialists are ready to help you
Expert:  Joshua replied 2 years ago.
Thank you for the above. The income is notifiable to HMRC as income tax and is charged at your prevailing income tax rate alongside your salary and any other income. Before working out the amount on which you pay tax you are entitled to deduct any of the following payments you make on the property:letting agents’ feeslegal fees for lets of a year or less, or for renewing a lease for less than 50 yearsaccountants’ feesbuildings and contents insuranceinterest on property loansmaintenance and repairs to the property (but not improvements)utility bills, like gas, water and electricityrent, ground rent, service chargesCouncil Taxservices you pay for, like cleaning or gardeningother direct costs of letting the property, like phone calls, stationery and advertising From the balance income tax will be payable. To work out the amount of tax payable for the last couple of tax years, you can use this calculator adding the net rental figure in the "bonus" box - it is taxed in the same way. Obviously this will show the total amount of tax due including your salary on which you will already have paid tax using PAYE so you can deduct the tax you have already paid from the total shown as due. For previous years before the last two years, different tax rates apply though it would not typically alter the amounts by much so it will give you a very good idea of what is likely to be duehttp://www.thesalarycalculator.co.uk/salary.php You can advise HMRC by completing a self assessment return online:https://www.gov.uk/register-for-self-assessment For previous years, HMRC is likely to apply a penalty for late filing of the return but because you are notifying them voluntarily the peanlty is likely to be assessed at the lower end of the scale. Much higher penalties apply when one is caught out. HMRC will not typically agree long term arrangement by instalments but are open to sensible instalment proposals which pay unpaid tax relative quickly. You can discuss such proposals with a tax officer and your account is likely to be able to provide you more information on what the Revenue may be willing to agree and if necessary help to put together a proposal with you. I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me I'd be very grateful

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