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?

Thank you

Whilst I am sure a lot of landlords who claim not to know about this are going to be liars, we need to acknowledge that some landlords are just very thick. Contrary to the popular attitude of the sorts of people who come on Mumsnet, owning property does not in fact prove you to be intelligent.

I can’t imagine not knowing and we have rented a flat out for 20 years. We pay tax of course. With all the new rules coming, we are trying to sell up currently.
My friend rents out two houses and hasn’t told HMRC. Has lots of nice holidays on the passive income!

Of course people know this. You'd have to be ridiculously thick not to know.

This is about not understanding tax, not about being confused about landlording. I guess these people are on PAYE and don’t fill in a tax return. They’d know if they did.

Yes, it's very clearly stated on the self assessment form. But I guess if you've never done self assessment and are very uneducated you might not realise that all earned income is taxable.

All income is taxable (earned or from savings/investments) if it's over tax free allowances and not in an ISA, I think everyone knows this, they might chose to play ignorant though and hope the tax man doesn't catch them, saying you didn't know won't play well if they do.

Dob them in, they are robbing all of us.

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?

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.

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

Trust me, he knows.

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.

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

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.

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

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

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 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!

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?

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 😥

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

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.

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.

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 !