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

[sicknessmedi]

Most people don't realize that if you have a second home and rent it out, you have to declare rental income as income and pay tax?

It’s not entirely uncalled for I was trying to work it out to.…

.. are you posting to see if people really didn’t realise (spoiler alert I can’t think of anyone sensible who wouldn’t)

.. were you pleased when you found out yourself (I think it’s a good thing)

.. what do you think it explains, eg hatred towards landlords because people think they don’t pay tax?

.. and has knowing this changed what you think about anything, if so what and why?

I have come across (in a voluntary role I do) lots of landlords who didn't understand that - just as with any business - they had to budget for expenses eg. Routine maintenance, repairs, void periods. What kind of idiot doesn't set money aside for repairs and maintenance. It's staggering. So sadly I can well believe that some also don't realise they have to pay income tax on an income

I would think most people know you have to pay tax on income.
HMRC do loads of adverts about tax returns and it would be impossible to fill out a tax return and NOT know as it is a specific question.

How would you not know that rental income is taxable? I'm not a landlord, but it seems obvious to me.

Until the law changed in 2015, landlords could often not pay income tax on rental income, as you only had to pay tax on the profits. So, if the rent was similar to the mortgage, that mortgage payment would be an expense, therefore no income tax due. Maybe some people aren't aware of the change.

Surely that’s glaringly obvious?

Everyone knows this. Other than you seemingly.

Rent a room scheme allows for the first £7500 from a lodger to be tax free. But yes presumably everyone who needs to know understands that tax is generally liable.

Most people do know this, in my opinion. However, some comments I’ve read on other posts on Mumsnet suggest that when moving for work you can rent out your own property, for example for £1k per month, and then use that same £1k to rent a property in another part of the country. I don’t think everyone in this situation realises tax is payable in the rent received at your marginal rate so this situation is definitely not cost neutral.

You must know lots of stupid clueless people

But it would still have to be declared, i.e. shown not to be in profit.

So you've spoken to one person and you've translated that to "most people"?

I don't know anyone with additional properties who doesn't know this.

I've seen a few people post online, here on MN and on Facebook who are considering renting out a property, either by buying a BTL or from an inherited property, and people have informed them on the threads that they need to pay tax on the rent they receive, and they weren't aware of this. But this is BEFORE they've actually had an additional property.

If the guy you've spoken to has deliberately started buying investment property and he doesn't know his tax obligations, then he's an utter muppet.

It’s smacked all over HMRC’s self assessment paperwork, which you fill in each year, so not sure how someone couldn’t know unless they can’t read.

Would love to know who these people are! People who rent a room have a tax free threshold however anything else is taxable income.

I'm not sure I buy it that anyone who rents a property out doesn't know, ludicrous.

Anyone who has ever seen or filled out a tax return, knows. As does anyone who has taken legal advice related to a tenancy, so it would be difficult not to know.

Money from letting a room in your own home is tax free up to £7,500 p.a.

he has an asset there which is increasing in value,

And that increase gets taxed too.

Only some of the expenses. Not all are tax deductible.

They choose not to know 🤣

Yup, I know 4 people that rent houses, 3 of them have never paid tax, or think they have to. The forth person has loads of houses so has always paid.

I just smile and nod.

I know quite a few white van men/decorators that pay far less tax than they should too though. They'd be far more aggressive if I suggested they should, so I pretend I don't understand if the subject comes up. I'm amazed at how many people not on paye think the tax threshold is over £100 grand.

Qi am sure if the scummy slumlords who avoid every other obligation they can wriggle out of could avoid HMRC, they would!

I dont think there can be many, if any at all, landlords who don't know this.

All income is taxed…

You still had to fill out a tax return …

Surely the majority of people know this even if not landlords. So yes YABU.

He's going to get a hugely nasty shock when HMRC audit him.

Not knowing is never accepted as a justifiable reason for not paying your taxes. Hilarious that anyone who rents property for income wouldn't realise the VERY basic rule that earned income is taxable.