Argh. Yes. January. Tax. But please come and help me work out if I need to DO a tax return at all?

[WilfShelf]

I don't think so. Scenario is we have a second property (before y'all beat me up for being a champagne socialist, we bought this for DH's mum to live in when she was ill, sadly she died, we couldn't sell because we'd already been paying the mortgage for years and couldn't afford to without making back the loss, so now we let it)

We made nothing in the first year, which is the one now due for tax declarations: minus 210 pounds after allowable expenses 09/10. Current year it looks like we may make 200 quid, if we can replace the tenant quickly (he's moving out).

Do I need to even bother contacting them? I suppose if I've not got the deductions right I could be due to pay something?

I did speak to the tax office who said to send in our accounts, statement of mortgage interest etc. and ask for it to be done 'informally'. I do have a spreadsheet and accurate expenses all documented. But if I do that now, the HMRC is just going to be pissed off isn't it: with all the full-on tax returns to deal with?

Should I wait? If I wait, am I at risk of being perceived as not declaring something?

Sorry - this is probably a VERY stupid series of questions but it's all new to me

If I don't

i've never heard of an informal tax return. if you dont fill in a tax return and then they choose to examine your affairs you could face a large fine.

its really not that difficult. If you have made a loss you'll pay less tax on other sources of income (wages etc) so you may get nice cheque from the tax man.

its really not that difficult to do self assessment.

Technically you have to do a tax return if you have some untaxed source of income - regardless of whether you're making money from it or not. In your case it might even be beneficial doing the tax returns as it will log a loss from your property business and that can be set off against future profits. Therefore, if you do a tax return for 09/10 and declare a loss it will be logged by HMRC. Next year, when you do your 10/11 return then you can set the loss against any profits made and therefore pay less tax. There are penalties in place if you are due to do a tax return (which you are) but don't submit it or submit it late.
Whether you have to pay tax or not depends on your/your partner's other income. There will be some tax to pay if your income and your partner's income (I'm assuming you own the property jointly) is above £6,475 AND you're making profits from the rental.

herhonesty - rental losses cannot be set against other income, only against future rental profits from the same rental business.

but none the less she still needs to do a tax return.

i think you might be wrong in that she isnt due to do one. as you say you have to declare untaxes sources of income regardless of loss.

Yes you need to do a tax return. Sorry!

You do need to do one, sorry. You have income that has not been taxed. And, as riksti says, it will be a record of the loss so that it can be offset against any profits you make in the future.

herhonesty - when did I say she doesn't need to do a tax return?

Unless you have been sent a return then NO you don't have to file a return in this situation - see here.

However, the loss can be carried forward to offset against the profit in future years, Given the amount involved, and the very short time frame left to file the return it might not be worthwhile.

You say "we" so presumably it is a jointly owned property - in which case you would both need to make a return of your %'s of the income.

And actually, I see no reason why you can't keep your record of the loss for 09/10 and carry it forward to offset against your profit in 10/11 without filing on 09/10 tax return.

Oooh, thanks all.

ChasingSquirrels, yes, that was the site I saw a while ago. It does say if you earn under 2500 from rental income you don't need to - I guess that was what the local tax office meant by 'informal' - I think with small amounts they can adjust the PAYE amount.

Yes, it is a jointly owned property. Ah. So that means DH and I would need to do it separately? Eek. I assumed I could do it jointly. Stupid of me.

If I ring the local office again for clarification are they going to go nuts at me?

Thank you very much.

it actually says "if you don't already complete one then you should do if you have...."

BUT as well as the requirement to complete a tax return, there is also the requirement to notify HMRC if you have new sources of income (see further down that link "Things to check if you don't need a tax return").
So, you tell them you have a new source of income, they decide whether or not you need to do a tax return.

I have to say I haven't heard of an informal assessment (I'm an accountant), but I guess that could just be the wording the person you spoke to used.

In the circumstances you describe - you haven't actually got any taxable income from the property (because you have an allowable loss in the year in question) so there is nothing to tell HMRC and no need to do a return.

You will have to do a return for 10/11 if you have taxable income - but you can offset the loss of £210 from 09/10 against it.
(Personally I would make that calculation myself, conclude that I had no taxable income for 10/11 - if the loss b/f was higher than the profit for the year - and not ask for a return for that year either. But I am not completely sure on the definition of taxable income here, and whether it is defined before or after the allowable loss, so although that is what I would do, I am not saying it is 100% correct).

You wouldn't do a joint return as it isn't a partnership (as such) but a joint rental investment.
Therefore you would each have your one Tax return with your share of the rental shown on it.
You just do the calculation - and then half (or whatever %) the figures for each of your returns.

No, the local tax office won't go mad at you. But equally, they may give you crap advice :)

The bottom line is

• You haven't been sent a notification to complete a tax return.
• You don't have any taxable rental income to self-assess (assuming your calculations are correct).