Can I register a self employed landlord?

[ForeverBubblegum]

I’m planning on retraining in the near future so trying to work out finances as things will be a bit tight for a year whilst I’m studying. We are lucky enough to own a flat which we rent out and the income I get from this will be my main source of income whilst studying. I’ve previously declared this income on tax return for ‘not self employed’ but once I leave my current job could I claim that I’m running a property business?

Obviously I don’t do enough hours to qualify for WTC but as far as I can see there’s no hours requirement for tax free child care, you just need to earn an average of £120 a week which I would between the rental income and a few hour work I can fit around training. I could also then try to make a voluntary national insurance contribution so that I’m coved for benefit entitlement if I don’t find work at the end of training or need to take maternity etc.

Seems a bit cheeky now it’s written down as affectively I’d be given money on the basis that I have money coming in whereas if I didn’t I’d get nothing, but as the same time if I can save 20% of childcare bill that would make a massive difference.

Any financial whizzes out there know if this is possible?

Phone HMRC and ask them, it's their rules, they'll be able to tell you.

Yes that probably is a sensible move, I just thought of it so was hoping to rule it out if it was completely ludicrous before spending hours on hold

Depending on what you are studying you will be eligible for help with childcare costs via college / student finance.

HMRC don't regard letting a single property as a "business". Your income is investment income, not trading/business income.

Correct. Income from rental is not wages, nor can it be used for pension contributions.

Hmrc told me it is classed as unearned income. The mn sheep will love that. When I was cleaning up filth left by a tenant in what was an immaculate property, I found it less amusing.

No, as others have said this is investment income, not trading income

You say "we" own a flat. That income would be split proportionately depending on ownership and if you are married 50/50.

I agree with the other posters.

Is it possible to set up a limited company and become an employee? I don't know the answer to this btw.

In theory it is possible but she would be an employee and a shareholder (plus the other person who owns would have a share).

However, it would cost money to do this, there would be additional accounting and reporting costs and she would need to replace any residential mortgage with a commercial one.

It may well not be financially viable.

Hi everyone, thanks for the replies. I said we as DH and I have shared finances so I view it a a shared asset but technically is in my name only. However doesn't really matter as consensus seems to be I either can't or if I can the accounting process will cost more then I'll save.

On a related point if I work more during college holidays can I average the income over the year to qualify?

It doesn't really cost anything to set up a limited company. I have one. Set up direct from Companies House is less than £20, then annual return is £15. There's nothing else you have to pay. As a small business you'd get the accounts exemption so no audit needed, there is no law saying your accounts gave to be done by an accountant.

You can run payroll via the free HMRC software and no pension contributions where it is owner-director only (though I do pay into pension for tax reasons, just not auto enrolment).

Obviously there is corporation tax on profits. But a variety of ways to take money out (though those are less advantageous from next financial year).

It doesn't really cost anything to set up a limited company.

Far more to it than that. What about the legal fees and stamp duty and capital gains tax upon the company buying the property from the OP not to mention paying off the old mortgage and getting a new loan at higher interest rates and higher arrangement fees? That could easily come to several thousand pounds, if not tens of thousands? You can't "DIY" that!

Yes, accounts and returns are "do-able" without an accountant but you need to do a lot of research, learn basic double entry book-keeping, learn basic corporation tax rules, basic payroll principles, etc. If you've got the time and ability to do that kind of research, then fair enough, but please don't make it out to be so easy and that anyone is capable/able to do it!

Quite agree karrie. SDLT alone is £10,000 on a £250,000 property.

To change my BTL over to a limited company would cost me almost £50k in SDLT plus another £50k in Captial Gains Tax

@karriecreamer

I was only commenting on how 'hard' it is (allegedly!) to set up a Limited company, not on how that company might deal with things like SDLT, nor how it might run as a property business or what any additonal costs to a BTL might be through a Ltd co - if you read the actual words I wrote, that was all I said.

It is really easy to set up a Limited company, you don't need to learn double entry bookkeeping at all. Small companies don't even need to submit full accounts to Companies House. The payroll is minimal if you're only employing yourself (I don't pay myself any wages at all, just do zero returns on the HMRC payroll system, which is straightforward and then pay dividends only). They do need to do tax returns which are a slightly more challenging but if someone has a BTL they are doing complex tax calculations already.

Even if they do decide to use an accountant, mine costs me £250pa to do both my company accounts and my personal self-assessment, simply because I don't have time to do them. But it really isn't difficult. Certainly not difficult enough to require exclamation marks.

Property is never trading income. You can own 10 properties and work 12 hours a day, it still is not trading income.