Additional Income and tax liability

[mansfa]

I am employed 9-5 for a large Bank and pay my tax IR through PAYE. Nothing complicated yet.

However I own some shares ( dividends) have some money on deposit, and own a rental property in addition to my own abode. If hypothetically I had never filled in a self assesment and paid tax on these earning, and felt it was about time to, what is the best way of doing this?

Anybody know and decent yet not stupidly expensive accountant that can help?

Confused.

[Vesuvius 996]

mansfa said:

I am employed 9-5 for a large Bank and pay my tax IR through PAYE. Nothing complicated yet.

However I own some shares ( dividends) have some money on deposit, and own a rental property in addition to my own abode. If hypothetically I had never filled in a self assesment and paid tax on these earning, and felt it was about time to, what is the best way of doing this?

Anybody know and decent yet not stupidly expensive accountant that can help?

Confused.

I'd go and see a solicitor, with experience of criminal work.

[MANSFA]

I dont think there is going to be any tax liability as the costs ( mortgage etc) are roughly equal to the income received, is this really a matter for a solicitor or can returns be submitted late?

[Vesuvius 996]

MANSFA said:

I dont think there is going to be any tax liability as the costs ( mortgage etc) are roughly equal to the income received, is this really a matter for a solicitor or can returns be submitted late?

Well, I go from persoanl experience. I ducked sending in returns for six years, and then decided I'd better come clean and do one two years ago. So I did.

And they said thanks, now you can fill in these six as well, by the end of the week. And you had better be able to provide us with full documentation and all your receipts and books.

Sphincter loosening stuff.

Thankfully I had nothing to pay, but if you've been earning material taxable income and not telling them then you have to hope that payment of heavy interest, penalties and the fact that you owned up rather than being rumbled mean that they don't go after you with too much vigour.

I am not sure that mortgage payments can be set off against rental income, although I may be wrong.

To be fair I wouldn't think that as long as you own up you'd be prosectuted, unless you fall within certain groups such as an accountnt or lawyer, of whom they enjoy making an example.



Eric Mc is your man - doubtless he will be along soon.


Best of luck.

Edited by Vesuvius 996 on Monday 13th November 14:11

[Eric Mc]

If you have income which is taxable outside of PAYE and other forms of automatic tax deduction at source you should be seriously considering that you need to complete Self Assessment returns. Having a rented property is one of those key activities that invariably generate the legal obligation to make a Self Assessment return.

Vesuvious ia correct, mortgage repayments ARE NOT allowable costs that can be offset against the rental income. As you are no doubt aware, the mortgage payment is made up of two elemnts, capital and interest. The capital element (the actual loan repayments) cannot be claimed as an expense. However, the interest element IS an allowable cost and CAN be offset against the rent received, If you have an interest only mortgage, then all the payments you are making consist of interest only and will be allowable.

[Vesuvius 996]

Eric Mc said:

If you have income which is taxable outside of PAYE and other forms of automatic tax deduction at source you should be seriously considering that you need to complete Self Assessment returns. Having a rented property is one of those key activities that invariably generate the legal obligation to make a Self Assessment return.

Vesuvious ia correct, mortgage repayments ARE NOT allowable costs that can be offset against the rental income. As you are no doubt aware, the mortgage payment is made up of two elemnts, capital and interest. The capital element (the actual loan repayments) cannot be claimed as an expense. However, the interest element IS an allowable cost and CAN be offset against the rent received, If you have an interest only mortgage, then all the payments you are making consist of interest only and will be allowable.

I never thanked you for the help, Eric. Much appreciated!!

[ashes]

Don't forget you can claim 10% of rental for wear and tear, plus travelling to and from, phonecalls,etc

Come clean, they will likely catch up with you and thats not going to be nice!

From personal experience found local IR office (Leeds) very helpful

[Eric Mc]

10% Wear and Tear applies to Furnished Lets only. It is worthwhile claiming - but only when appropriate.

[MANSFA]

Thanks for the advice, the flat has been let furnished plus I can add the mortgage interest, the service charge and ground rent, plus landlords gas safety and ad hoc maintenance. I should be ok with the tax man, best get some forms filled in...

[Eric Mc]

If you've made a Rental Loss, you can carry the loss forward to offset against future rental income.

[Piglet]

Eric Mc said:

Vesuvious ia correct, mortgage repayments ARE NOT allowable costs that can be offset against the rental income.

Jeez guys you scared the hell out of me until I read the rest of the post I've been happily offsetting my mortgage costs for the last 10 years and was just trying to work out how much back tax I might owe

Happily mine is interest only so that's ok, panic over!

[Eric Mc]

It pays to read all the way to the end

When you think about it, why should you obtain tax relief on the repayment of capital. After all, the Revenue didn't tax you on the cash you received when the money was originally loaned to you.

[Smartie]

Eric Mc said:

After all, the Revenue didn't tax you on the cash you received when the money was originally loaned to you.

DONT GIVE THEM IDEAS!

[Eric Mc]

I should be Chancellor.

[BigAlinEmbra]

Unusually for EricMc, as he's Mr Thorough, he's missed out the dividend and savings issue.
(Not taking the piss Eric, you're always bob on!)

The dividends and savings income should already be getting taxed at source so you should be ok on them.
Rental income, do as Eric says.

[2 sMoKiN bArReLs]

BigAlinEmbra said:

The dividends and savings income should already be getting taxed at source so you should be ok on them.
Rental income, do as Eric says.

..depending on your marginal tax rate of course

[Eric Mc]

You would have to complete a Self Assessment return if you were a higher rate tax payer and part of your income was through dividends.