Aibu most people don't know rental income is taxable?

The thing is, this makes me extremely cross. At present there is a lot of anxiety around the next Budget and what tax rises are coming - if all these people who are meant to pay tax on their rental income did, there wouldn’t be such an enormous shortfall. Quite a few people who aren’t declaring rental income (whether from a whole property or letting a room on Air BnB) are the same people who think that “the rich” should pay.

I am a landlord (who pays tax, obviously).

I was just thinking this. You have money, any money, coming into your bank account, the government will tax it if they know about it.

Who remembers this ?

https://www.bbc.com/news/uk-england-berkshire-23490395

Land registry records. They can, and do check these and if someone owns more than one property they will write to them to ask if they should be filing tax returns to report the rental income.

sadly though, Hmrc is underfunded and it's time consuming

https://www.gov.uk/rent-room-in-your-home

However, if you live in the property & rent out a room

A person can earn up to 7k per year tax free

HMRC has ways to find out, and then they’ll be going after interest and fines.

Some people also have property abroad that they do not declare too

But the questions are on the self assessment tax form

Currently I have one property that I rent out

Yes, I have paid extra stamp duty on buying

Yes; I have paid capital gains tax on selling

Yes, I have paid tax on the income & filled out the self assessment form each year.

I sleep at night !

However, I also have known people that do not declare their income or assets. They think that they are clever !

I have read that HMRC can go back 25 years into the past to claim unpaid tax with interest

The issue is that people have to voluntarily submit the information & it is easy not to provide the info & not to pay the tax !

From all I’ve ever heard, it’s more often not a case of not knowing, it’s a case of not paying, i.e. failing to declare it on a tax return.

Prime example, friend of a dd, a doctor who went to work in a different area and rented out her own home, was talking to a couple of colleagues (married doctors) who told her she was mad to be declaring her rental income. ‘We never have!’

I suspect that it’s rife. The self assessment tax form asks only how many properties, not addresses. If you have no mortgage, don’t use a letting agent, and don’t live in an area where you have to register with the council as a LL, there is literally nobody you have to tell that you are renting a property.

High time IMO there was a crackdown - I say this as a LL who does pay due tax.

I did know this and I'm not a landlord and have never rented. I have a feeling the tax rules on second properties changed in the past 10 years or so so maybe they just weren't up to date?

What I didn't realise until relatively recently is that I could be taxed on the interest in my savings, because I'd never breached the threshold until this year! I'd heard people talk about it but assumed that was people with seriously big bucks. I am a lower rate tax payer so I think I have an allowance of £1000 and will breach that on our joint savings.

If the time comes for you to sell, capital gains is a killer at 18% and 24%.

No need for AI - analysing bank statements was one of the things I did when I worked at HMRC years ago. Its not rocket science - but I imagine AI could do it in a blink of an eye so there's that advantage.

It was always easy to spot undeclared cash takings. No cash withdrawals for a whole year despite having said was never, ever, paid in cash.........much like our own dear departed Queen !

I remember one woman who said she didn't know her rental income should have been declared and taxed. Of course I didn't believe her and it made no difference to the huge amount she had to cough up going back several years with interest and penalties. She ended up paying far more than she would have if she'd done the right thing. It ruined her retirement plans 😥

yes exactly, I wonder how many people though stupidity or ignorance rent a property and just don’t inform HMRC. Would there be any way of HMRC actually finding out?! Must be a massive loss of tax for HMRC surely as it’s so hard to monitor?

I re-read it and I can see it sounds snarky but I didn’t mean it like that! I just don’t understand the point of the thread!

Whilst people like to blame the tax gap on big corporates, in reality it is small business and individuals who make up the majority of it

be it ignorance or deliberate - you can’t complain about avoidance/evasion or benefit fraud and turn a blind eye to your mates not paying tax on their income

I know. I mean surely it's obvious? as it's an income

That's tax evasion and should be reported because tax funds societal services like the NHS, infrastructure and public transport.

He's either thick or trying to dodge paying tax. My money's on the latter and he could well get a very nasty shock in the near future.

Obviously it’s taxable, why would anyone think it isn’t? I mean what would be the rationale behind that thought?

We are landlords and have completed a tax return every year regarding our properties.

In my experience, which is pretty long now, landlords generally do know that their rental income is taxable. Tenants however, usually think that we are just raking the money in with no further outgoings or demands on it. In fact, there are frequently mortgages, service charges, ad hoc bills from the managing agents, insurance etc. Then tax. There isn't always a huge profit left over.

Trust me, he knows.

Landlords get a 20% tax credit on their mortgage payments, used to be the whole amount could be offset
Being a LL is far less lucrative and more hassle than it used to be, which is why so many sell up now
I do agree they should pay all tax due though and am surpriseed anyone would think otherwise

Shop him to HMRC. I’m serious. Him dodging tax means the rest of us have to pay more. Or that there’s less money for hospitals, schools etc. He’s a twat.

HMRC are getting much better at spotting this due to AI allowing them to scan transactions. If you haven’t paid tax on rental earnings how do you expect to explain why you get £500 in your bank account every month?