Tax credits and additional income

[HenriettaChicken]

Good afternoon all.

I have just found out my DH, DS and I are eligible for Working Tax Credits, and Child Tax Credits. In fact, we've been eligible for months (I'm on Mat Leave) but when I self-assessed I didn't realise they didn't want to know my usual salary, but what I'd actually be receiving. Silly.

Anyway, I now have the forms but have a question about rent. We are currently landlords for my house. When I married I moved in with DH and rented my house out. £500 rent covers the mortgage (c£400) plus £100 per month.

Does this all count as income, or just the extra £100?

We're going to need to get used to filling forms in as we'll be completing our first tax return soon. But there's a whole other story.

Thanks in advance (and any helpful hints would be great!)

It's the profit you declare from your rental that counts as your income. So the £100 less any extra costs such as maintenance.

Should add.... you might want to get an accountant to help you with the tax return because you could find you're actually making a loss on your rental and can offset this against your earned income.

Thanks Cogito. It sounds like it might be worth filling in the tax return first? Unless I can fill in the tax credits forms and then update them if my income goes down?

There's more to this than I realised?

Also, would an accountant be a good investment bearing in mind it's only a few thousand pounds we're talking about in total? I have no idea how much these appointments cost, but I hear accountant and think 'out of my price bracket'

You should shop around for advice. If your property business isn't very complicated and you have all the paperwork ready to go you could find it costs you a couple of hours of someone's time and it's worth it in terms of what you learn and what you get back in tax rebates and so forth.

£100/month is not going to make a big difference either way to your tax credit award or your tax bill. But, if an accountant tells you that you've forgotten to allow for repairs or some other cost of being a landlord that's worth knowing.

I'd fill in the tax credit forms first with your income as you understand it. Don't spend every penny of any award you get but keep something back in a savings account. Come next April when you can file your return for 2012/13 tax year and have to make a new tax credit claim, do both and manage any adjustments.

That's great advice, thanks!

Having just completed a tentative spreadsheet on excel, it looks like our venture made a loss of £200 last year!

That feels a bit cheeky, as we're essentially getting our mortgage paid off, but...

We used to have a let house, there were some useful advice leaflets from the Tax Office. We didn't use an accountant, but a neighbour who is an accountant gave me some tips.

I seem to remember including insurance, mileage for visiting the property, any work that needed doing and the annual gas check.