Hello and welcome to the site. Thank you for your question.
Rental income is chargeable to income tax.
You should have declared it to HMRC on your tax return albeit you have made a loss on it year on year.
As the property is in joint names, each of you should declare your share of the rental income/net profit or loss separately.
This would enable the losses to be carried forward and offset against rental income profits in the future.
You have asked what you should do going forward... my advice to you is -
- report rental losses of past years by writing to HMRC and submitting the rental income accounts for each of the years.
- as far as tax year ended 5 Apr 2014 goes, you can amend the tax return up to 31 Jan 2016 and it would not carry any penalty.
You may be charged fixed penalty for earlier years for non disclosure of rental income (albeit it it showed losses). You should make a voluntary diclosure under Let Property Campaign. More information on this can be found here
I hope this is helpful and answers your question.
If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.