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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Just wanted to know i have a interest only mortgage and

Resolved Question:

HI just wanted to know i have a interest only mortgage and on a low income of £120 a week so £6240 a year in wages, So rented out my house for £675 a month and my mortgage is £550 so i have a profit of £125 a month,, i am now being told i need to pay tax on rental income for the last five years . So could you please let me know how much asap. thank you
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Are you saying that you have made a profit of £125 per month for each of the last five years? When exactly did you start letting the property (month and year)? Did you incur any other expenses? What other income did you have for each of the tax years you have been letting the property?
Customer: replied 2 years ago.

Hi i have been renting it out since july 10th 2000, my profit after paying mortgage is £125 a month. Did not have any other income coming in thats why had to rent it out.

Expert:  TonyTax replied 2 years ago.
Thanks.

You said in your question that you have been told that you need to pay tax for the last five years? Who told you that? In your last post you said that the letting started on 10 July 2000 which is 15 years ago. Was 2000 a typing error? Should it have been 2010?
Customer: replied 2 years ago.

so sorry yes typo error 2010 and it was from tax office

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I do some calculations. It will take a while so please bear with me.
Customer: replied 2 years ago.

Thank you so much i appreciate it as i am worried sick. Also i pay rent of £55 on a flat i am in,,, just checked letter and its from HM Revenue & Customs let property campaign thanks.

Expert:  TonyTax replied 2 years ago.

Hi again.

In 2010/11, the net income would have been £1,125 (9 months @ £125 per month). For the other tax years up to 2014/15, the net rental income would have been £1,500 per tax year.

The personal allowance for 2010/11 was £6,475 so if your earnings for that year exceeded £6,240, you would pay income tax on the net rental income of £225 (£1,125 @ 20%).

The personal allowance for 2011/12 was £7,475 so if your earnings for that year exceeded £7,475, you would pay income tax on the net rental income of £300 (£1,500 @ 20%).

The personal allowance for 2012/13 was £8,105 so if your earnings for that year exceeded £8,105, you would pay income tax on the net rental income of £300 (£1,500 @ 20%).

The personal allowance for 2013/14 was £9,440 so if your earnings for that year exceeded £9,440, you would pay income tax on the net rental income of £300 (£1,500 @ 20%).

The personal allowance for 2014/15 was £10,000 so if your earnings for that year exceeded £10,000, you would pay income tax on the net rental income of £300 (£1,500 @ 20%).

The tax rate for each year could be 10% depending on the level of non-savings income. If you had no other income or the total income in any year was no more than the personal allowance, then you will have no tax to pay.

There are other expenses you can claim against rental income. Take a look here for a list of the types of deductible expense.

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

Expert:  TonyTax replied 2 years ago.
Correction.

The personal allowance for 2010/11 was £6,475 so if your earnings for that year exceeded £6,475, you would pay income tax on the net rental income of £225 (£1,125 @ 20%).
Customer: replied 2 years ago.

Hi am i right in reading i have no tax to pay and can i copy this page and forward it to them so it is explained out to them.

Expert:  TonyTax replied 2 years ago.
The personal allowance is the amount of income you can have for each tax year without paying tax so if your total income for each year was less than the personal allowance, you can have no tax to pay.

HMRC will probably want a bit more detail than my answer. Call them and ask them exactly what they want in terms of income and expense proof.
Customer: replied 2 years ago.

Thank you i am glad i do not have to pay back any tax . Many thanks again x

Expert:  TonyTax replied 2 years ago.
Thanks and good luck with HMRC.

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