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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5141
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I own a flat which I have rented out since May 2009. I have

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I own a flat which I have rented out since May 2009. I have never done a self assessment tax return. The reason for this is that from the literature I read I understood that you did not need to do a tax return if your rental income was less than £10000 per annum before allowable expenses and less than £2,500 per annum after allowable expenses . Until recently, and certainly up to April 2014 I was below these thresholds. For the first few years I purely covered the mortgage, insurance and factors fee. For 2013-2014 I made a small profit of about £100 per month. However I recently discussed this with a friend who thought I was wrong and should have been doing tax returns. Please can you help me with some advice? The mortgage is interest only. Thanks in advance
Hello and welcome to the site. Thank you for your question.

You are correct in your understanding that you don't have to fill a tax return if you have income from UK property or land that is less than £2,500 after allowable expenses or £10,000 or more before allowable expenses.

Having said that, property income is taxable and you should have notified HMRC of this income. You say, for the first few years you purely covered your allowable costs and there is no profit. For the tax year 2013-14 (current reporting year) you have a small profit.

As you have never done a self assessment return, you should first register for self assessment on the grounds that you have property income. HMRC would issue you with a unique tax reference number (UTR) and it is a 10 digit number (e.g. 12345 67890).

As you would be completing a self assessment return for the first time, HMRC will normally send you a Tax Return for completion.

You can register for self assessment online and I am providing you with a link here

Now a bit of bad news, I'm afraid.
Late filing of self assessment tax returns carry a fixed penalty of £100.
More information on how penalties are calculated can be found here

It is important that you get your tax affairs up to date.

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.

Customer: replied 3 years ago.
Thank you for all this information. I am a bit confused with what I am declaring on a tax return - do you mean that I should do a tax return now for 2013-2014 or do you mean I should somehow provide the information going back to 2009? How do I do that?
And you mention the £100 penalty for late filing, but I understood the date was 31 January so if I get the return in before then why would I have a penalty?
Thanks in advance for any further explanation you vacant give me
Anna, thank you for your reply.

If you file the Tax Return 2013-14 by 31 Jan 2015, you would avoid penalty.

I was referring to penalties for late filing of tax returns prior to tax year 2013-14.

There was a change introduced in tax year 2011-12. Prior to that, although there was a £100 penalty for late filing but it was waived if no tax was due. As you have stated there was no gain in earlier years, so for tax years 2009-10 and 2010-11 provided there was no tax due the penalty would be waived.

More information on changes to penalty are covered here

I would recommend that
- you register for self assessment if you don't already have a UTR;
- report the property income from 2009-10 tax year if that was the first year of rental income;
- normalise your tax affairs;
- if there were losses in the initial years, you would be able to carry those losses forward until such time that they are exhausted.

I hope this is helpful and answers your question. and other Tax Specialists are ready to help you