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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13975
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am renting my home out a month and my mortgage

Customer Question

Hi I am renting my home out for 675 a month and my mortgage is 550 on a interest only but hmrc said I owe 5 years tax on doing this how much do I owe them. Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question - I am Sam and I am one of the UK tax experts.
Assuming there are no other expenses you will claim - you have made a profit of £125 a month which amounts to £1500 for each year (not £1250) so £7500 for 5 years.
If you income each tax year including this additional £1500 was less than the 20% basic rate band
2014/2015 £41865
2013/2014 £41450
2012/2013 £42475
2011/2012 £42475
1010/2011 £42786
Then the additional income of £7500 will be liable just at 20% = £1500 tax, but there will be penalties and interest for non declaration of income, late tax return completion and late payments
If you earn more than the above income for the years in question )but less than £100,000) then the tax will be £1500 x 40% = £3000 - and again penalties and interest
Penalties can range from 30% to 100% of the tax due depending on why you failed to declare this income.(So between £2250 to £7500
Late tax returns £100 for each late one, then another £100 up to 2012/2013 for each late one - then this increases and works out to be about £3000 a year so a max of £6600 - plus late interest 3% per year so approx £225 but if this has come about due to an enquiry then they are usually far more lenient on the additional charges.
Let me know if you require any further assistance
Thanks
Sam