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Small rental profits and tax returns

Can I get this straight once and for all(?)

Didn't find your answer?

As per https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return, if you get £2,500 or more in untaxed income "(for example from renting out a property)" you must complete a tax return.

I read that originally as rent, but as it goes on to say if the income is below £2,500 you should contact HMRC (who will presumably code it), it seems more likely it refers to profits (why not say profits...).

It then goes on to say you must complete a return if you have investment income over £10,000, which is again ambiguous (does that include rents?).

What I'm leading up to is, if you had rental income which exactly equalled your expenses (as maybe you just felt like letting out an unused property and you were a nice person who wasn't bothered over the money), would you need to complete a return?  Would the position be the same if the figures were each £10,001 (or is income taken to mean profits again - I could have sworn a while ago there was a 'low rental profits are fine, but if rent exceeds £x you have to do a return regardless' rule)?

Replies (7)

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By Accountant A
06th Nov 2017 17:11

You need to keep on clicking on the endless links in the hope of finding some degree of clarification, eg:

https://www.gov.uk/renting-out-a-property/paying-tax

"You must contact HMRC if your income from property rental is less than £2,500 a year.
But you must report it on a Self Assessment tax return if it’s:
£2,500 to £9,999 after allowable expenses
£10,000 or more before allowable expenses"

That doesn't answer your question in full, mind you.

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By gilderda
06th Nov 2017 17:15

The section of gov.uk which relates to property rental (https://www.gov.uk/renting-out-a-property/paying-tax) suggests if your rental income is below £2,500 you need to contact HMRC to tell them and if your rental income AFTER ALLOWABLE EXPENSES is above £2,500 you must fill in a tax return.

Seems to contradict the tax return page, which says you have to fill in a tax return if your untaxed income exceeds £2,500.

Best advice is to always ring HMRC, ask, and take a note of who you spoke with.

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Portia profile image
By Portia Nina Levin
06th Nov 2017 17:27

There are only two rules:
1) If you have a liability to income tax or capital gains tax, and haven't been sent a notification requiring you to complete a return, then you must notify chargeability by 5 October following the end of the tax year.
2) If you receive a notice from HMRC requiring you to complete a tax return, then, unless you can persuade them to unissue it, you must complete a tax return.

Anything that is said beyond those two requirements:
1) is b*llocks, and
2) can be neither relied upon nor enforced.

How often are people going to try and examine the minutiae of HMRC fiction?

Thanks (4)
By ireallyshouldknowthisbut
06th Nov 2017 17:50

I have always found it easier in terms of total time spent to file the return than have them muck about trying to code it which always goes horribly wrong.

WIth an SA return you are in control, and the client tends to be much less resistant to paying you money for a tax return than a declaration by other means despite the main difference your end usually be keying in two lines from their P60!

Thanks (1)
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By thomas34
06th Nov 2017 18:14

PNL's quite correct - I've been using these criteria for 30 years i.e. ignoring HMRC's guidelines which are not backed up by law. If there's no tax liability why on earth would someone register a person for self-assessment with the attendant accountant's cost and a (very small) risk of an enquiry?

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Tornado
By Tornado
07th Nov 2017 08:24

Judging by the "Simple Assessment" sent to one of my Self Assessment clients recently and a P800 with underpayment demand for 2016 tax that has been settled long ago, I am now convinced that HMRC are descending into chaos.

The "Simple Assessment" for 2017 was so simple that it ignored much income, particularly rental income which has been a feature of his SA Return for years and demanded a tax payment when he has already made payments on account for 2017 which were ignored.

There is actually no correlation at all between these 'assessments' and SA Returns.

HMRC really are a bunch of clowns.

Thanks (1)
Quack
By Constantly Confused
07th Nov 2017 09:05

Thanks all.

I would love to adopt the PNL Two Step Process, but I have had more than a few instances of writing to HMRC to say 'the client had loads of income from x, but it results in no tax, so we aren't doing a return' being met with 'yeah... do one anyway'.

Maybe my mistake is telling HMRC in the first place...

The client has no tax to pay, so I'm leaving it at that, thanks all for the kind assistance.

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