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bigduckontax, Accountant
Category: Tax
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I have a second property which I have been renting out out

Customer Question

I have a second property which I have been renting out out 2006. I have very recently come to the understanding that I should have been declaring this income in sort of tax self assessment - I am very new to this and need some advice as to how I go about doing this and whether I am going to be penalised for past income.
Can you advise?
Gail Peters
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello Gail, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your problem.

You are in a spot of bother and no mistake as indeed you should have been declaring the net income. The following expenses [source: Which] band be deducted:

'The most common types of expenses you can deduct are:

  • water rates, council tax, gas and electricity
  • maintenance and repairs to the property (but not improvements)
  • contents insurance
  • interest on a mortgage to buy the property
  • costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
  • letting agents' fees
  • legal fees for lets of a year or less, or for renewing a lease of less than 50 years
  • accountant’s fees
  • rents, ground rents and service charges
  • direct costs such as phone calls, stationery and advertising for new tenants

The expense should be incurred wholly and exclusively as a result of renting out your property.'

What you must do now is work out for each tax year [6 April - 5 April] your net rentals. Then make your peace with HMRC by writing to your tax office giving details of this undeclared income. Now HMRC can do two things. They will charge interest on underpaid tax which is only fair as they give interest on overpaid tax. They may also charge you penalties for failure to declare. However, depending on your other income sources, if there has been no loss or minimal loss of Revenue, they may be lenient and waive penalties on voluntary declaration. Don't bet on it though!

I do hope that I have shown you a way forward in this matter.