How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask TonyTax Your Own Question
TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
13905389
Type Your Tax Question Here...
TonyTax is online now

Hi I have just worked out that my wife and I should have

Customer Question

Hi

I have just worked out that my wife and I should have been paying tax on income from a second property so we are due around six years back payment.

The property is in joint names and I did not realise until recently that you can only offset interest only part of mortgage against tax.

The ammount payable is less than can be paid through PAYE.

This year I have to do a self assessment as a higher rate tax payer receiving family credit therefore have to register that with HMRC by end of 5th October but am asked on that registration form about second property.

The issue is not paying but best way to approach to minimise any interest or fines.

E.g. do I contact HMRC and explain and pay back dues and make point that what my wife and I have paid through PAYE (therefore we have underpaid rather than not paid?)should be more and then either pay that way in future years or do it through self assessment.

And secondly, I assume we would both pay the tax after splitting everything down the middle at our individual tax rates as the property is in joint names (my wife pays normal tax rate).
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.


You should have registered for self-assessment when you started to let the property unless the net income was less than £2,500 per part-owner in which case any tax due could have been collected through your tax code if you have income sources subject to PAYE which you say you have.

Take a look here for information on letting income and tax. There is also a section on expenses.

Complete the form to register for self-assessment which you need to do in relation to your child benefit claim in any event. As far as the rental income is concerned, you should draw up an income and expenditure account for each tax year that the property has been let and then write a letter to the tax office explaining the situation and explain your misunderstanding of which part of your mortgage payments you can offset and that you wish to get things straightened out as soon as possible. You should also point out that the income was low enough to have the tax collected through your tax codes so you don't consider that you needed to register for self-assessment for the earlier years.

The tax office will assess any tax that is due, they will charge interest from when the tax should have been paid and may charge a penalty for late notification. You can read about the old and new penalty regimes here and here. Approaching the tax office about the rental income before they find you will help you in keeping penalties to a minimum.

 

The income should be split in proportion to your ownership shares. You will each pay tax based on your individual tax rates.

You might consider employing an accountant or tax adviser to deal with the tax office for you, especially if you are unfortunate enough to have an overly officious tax office individual dealing with your case.

I hope this helps but let me know if you have any further questions.

TonyTax41527.5899282523

Related Tax Questions