inland rev and rented house, guidance please

[rainyrainy]

I have a property I rent out, it has consistently lost money so I havent bothered notifying Inland REvenue, but I guess I should, it has been rented for 3 years.

What do I need to do, will I get into trouble?? I can draw up the accounts myself as they are simply, I was going to claim a deduction of £200 a year for mileage, 10% of annual rent due for wear and tear (about £600), the buildings insurance and cost of Gas Safety Certificate, and thats all.

Going to do it on a cash basis with when rent was received. Mortgage is on interest only, so will be a simple money in money out excercise.

Its exactly 3 years, would I draw up 3 sets of accounts, or 1 to cover whole period.

Thanks

Sam

oh and cost of advertising

Look at the HMRC site and it will tell you what you can and can't claim. You cannot for example claim wear and tear if it is not a holiday home.

I complete a tax return for mine. The accounts show gross rent in, less mortgage interest, less Letting Agents Fees, less Landlord's insurance, less any repairs I have made (and can prove), and then my total loss at the end. As I have made a loss on paper each year we have rented it out, then the losses are carried forward each year, so that I do not pay any tax on the rent received. We do not need the rent to pay the mortgage so no problem there for us.

Register for self assessment on HMRC site and it asks all of the relevent questions and gives information on all that you need to know.
Do you have other income from employment? Because if you do then you should complete the self assessment and the losses on the property will be deducted from your other income before paying tax. If you have PAYE decuctions you will receive a refund. Or if you own them jointly, your partners tax.

The above is true, ONLY if it is a holiday let Lynli, not if it is let out all year round on an assured shorthold basis.

Sorry, I don't agree. DH has received a refund every year due to our losses on buy to lets.

I disagree with you, I checked this out very carefully with the Revenue when I rented out my home when we moved abroad. I have further checked the website today, and you can only offset losses against other taxable income if it is a furnished holiday let; or if it is a a business when you have trading losses which are treated differently. If your dh is running a buy to let business then it's different Lynli; but for renting out your private residence, you cannot offset losses against other income. If you could, I would have about 6k in cheques from the Revenue for dh, and I don't.

see here

www.hmrc.gov.uk/worksheets/sa105-notes.pdf

I agree with scaryteacher. You can only offset losses from a rented property against other income if it qualifies as a furnished holiday let. This is likely to change soon as well.

Also you can take a 10% wear and tear deduction (which is calculated as rent less water rates and council tax if you pay them x 10%) provided the property is furnished.

Oh and I would do 3 sets of accounts. For the years that are late, provided you have no other income that you would have to pay additional tax on, just send the details to the Revenue with a covering letter and ask them to send you a Return for 2009/10.

I work for an accountant and do loads of tax returns for rental properites. Scary teacher is right. You cannot offset your losses for renting out a private residence against any other income, just carry forward to offset against future rental profits.

Agree with scaryteacher on not being allowed to offset rental losses against PAYE. You haven't mentioned claiming mortgage interest as a cost unless I missed that. I filed mine this year January for the first time after two years of losses and I just claimed the loss and offset it against the profit - I know this isn't technically right but it went though okay and I have c/f about £1500 of loss for this years return. The rent is lower than £15k* per annum
so it can be a short return. *I think this may be £16.5k now but not sure.

I did mention mortgage interest; I do all that calculation first and then the rolled over losses from previous years, plus this year, so I never pay any tax on the rent; but I am a non-resident landlord for tax purposes, so have never had to pay any, just completed the return.

Mortgage interest bigger than the rent anyway!