Tax return for rented property income < £15,000 p.a.

[retep]

A relative is renting out her own property whilst she is staying elsewhere. I saw on a government website that if annual income from this is less than £15,000 (before expenses are deducted) 'you include the total expenses on your tax return' .

It also mentions that 'If it's below £15,000 you may be able to complete a shorter four-page return.' My relative is a PAYE tax payer and until now,has not had to fill in a tax return - as income tax is deducted directly from her salary.

As it says 'may' rather than 'can', I would appreciate any advice on how she can find out whether she can use the four page form i.e. instead of completing the longer tax form - I can't see any reference on the government site and would she get this from the Tax Office direct (I can't see any reference to it being downloadable) ?

Also,would the actual tax on the net rental income i.e. after deducting expenses,be charged at the highest tax rate she is paying on her income?

[Poppy]

I guess that your relative is a private individual (ie not a limited company) who is letting out property.

In that case your relative should complete a self-assessment tax return including the "land and property page".

What exactly is the "shorter four-page return" that you talked about?

You should also refer to the HM Revenue and Customs (http://www.hmrc.gov.uk) website.

[retep]

Thanks for the reply. Yes,my relative is a private individual (ie not a limited company) who is letting out her only property.

As she hasn't had to fill in a self-assessment form before letting the property,I was hoping that rather than having to complete this,she might be able to use the "shorter four-page return" instead. I saw reference to this in a government website but with no details,apart from this being a possibility if the gross rental annual income is less than £15,000; so I don't know anything more about it and that was the reason for posting my enquiry i.e. in case anyone might be able to give me any information about it.

I'll certainly have a look at the website you mention,in case it's mentioned there.

[jonblair123]

Are you perhaps thinking of Rent a Room scheme?.....does it apply if the landlord lives off the premises?

[retep]

Thanks Jon. I've now found out from the Tax Enquiry Office that there is a four page form for the circumstances I've mentioned i.e. gross rental income less than £15,000 pa,but you have to check with the IR whether it's OK to use it. In any case, they say that for the first year, it is necessary to complete the full self-assessment form.

[Worldlife]

Yes there is a four page "Short Tax Return" (SA200) intended to people with simple income situations and it does include a question concerning rent from property amounting to less than £15,000.

UK LAND AND PROPERTY
You cannot use this form is your land and property income was £15,000 or more - if it was, please contact us.

6.1 Income £

6.2 Expenses allowable for tax £

6.3 Profit £

6.4 Loss £

6.5 Land and property losses brough forward from earlier years £

The guidance notes for the Short Tax Return state:-


Use this form if you

were an employee and were paid wages or a salary, or received taxable benefits or expense payments. It does not matter if you had more than one job in the year.
were self-employed, that is, you worked for yourself and not for an employer, and your turnover (money earned before expenses) was below £15,000. But please check the 'Who cannot use the Short Tax Return?' paragraph over the page, too
received a UK pesnion (state, occupational or private) or an annuity
received taxable state benefits - for example Jobseeker's Allowance
received UK property income, below £15,000, for example rents, including letting a room in your own home [but excluding furnished holiday letting]
received taxable income from UK savings, for example, interest from a bank or building society, taxable National Savings & Investments income, company dividends or dividends and interest from authorised unit trusts and open-ended investments companies


I voluntarily include the section from Land and Property because the income is split three ways and I am the designated person for keeping the accounts!!

Maybe the tax authorities are not going to question the breakdown of rental income to expenditure provided it falls within certain parameters. I do however prefer the comfort of sending in an account with the knowledge that my short term memory would be able to cope with any enquiries!!

[Tax Accountant]

A relative is renting out her own property whilst she is staying elsewhere. I saw on a government website that if annual income from this is less than £15,000 (before expenses are deducted) 'you include the total expenses on your tax return' .

It also mentions that 'If it's below £15,000 you may be able to complete a shorter four-page return.' My relative is a PAYE tax payer and until now,has not had to fill in a tax return - as income tax is deducted directly from her salary.

As it says 'may' rather than 'can', I would appreciate any advice on how she can find out whether she can use the four page form i.e. instead of completing the longer tax form - I can't see any reference on the government site and would she get this from the Tax Office direct (I can't see any reference to it being downloadable) ?

Also,would the actual tax on the net rental income i.e. after deducting expenses,be charged at the highest tax rate she is paying on her income?

(1) The full tax return is not difficult to complete. You will simply leave blank most of the unwanted pages on the tax return.

(2) If you have a new source of income, you have to let the tax office know of this by a certain date after the end of the tax year for which you need to complete the tax return so that they can send you the necessary return for you to complete in good time.

(3) All net income is pooled together to calculate the correct amount of total tax due. This will be reduced by the actual amount of tax already suffered at source, eg PAYE tax, tax credit on dividends, tax on bank and building society interest etc. The balance is then due for payment or repayment.

(4) In your case, the net rental income will be taxed at the rates of tax applicable to the tax brackets it falls into. For example, if the net rental income was £8,000 and the other income has used up all but £2,000 of the basic rate band, first £2,000 will be taxed at 22% and the other £6,000 falling into the higher rate tax band will be taxed at 40%.

I hope this helps.

Ramnik

[retep]

Thanks to both of you for the useful info.

Retep

[Tax Accountant]

Thanks to both of you for the useful info.

Retep
You are welcome

Ramnik