Letting & Tax Question

They are almost certainly talking about "rent a room" where you share your house with a lodger and get a tax free allowance.

I don't think there is any link between NI and profits from letting. The NI will be dealt with by your employer unless you are self employed.

As you have been sent the return you have to complete it.

Exemption? What for? Are you self-employed as well? There is no NI on letting profits, no matter how large.

AFAIK you are generating income and therfore it is taxable,simple. I manage a property for a relative but fortunately dont have to pay tax as she lives outside the uk and therefore is non resident. I have a massive folder relating to the inland revs non resident landlords scheme which i have to digest. If they take that much trouble for someone who doesnt have to pay tax then I'm quite sure that you will have to pay tax!.

Don't forget that you can offset the interest you pay on the mortage against the rent recieved before calculating how much tax you have to pay. Also any letting agency fees I believe.

as always do your own research.

I've already pointed out that there's no NI on letting income, but should have added, since you mention tax threshold, that you don't get an additional personal income tax allowance for the letting. You've already exceeded the relevant threshold due to your employment income, and therefore all your rental profit will be taxed at 22%.

In message , tarquinlinbin writes

In these circs residency is immaterial. Loads of non residents pay tax on rental income in UK and letting agents should deduct tax from the rent before sending it to the landlord.

However, if the net profit from the rent when added to any other UK income (such as interest) is less than the individuals tax allowance then the Inland Revenue will issue a certificate to the agent authorising the gross rent to be remitted to the client without the deduction of tax.

It is the level of income that makes it non taxable, not residency. The IR go to all that trouble so as to keep an eye on the rent in case income increases and tax would become due

Well, I informed the tax office that I was employed full-time and had recently become a landlord. The tax office sent me N.I. forms to complete. They regard being a landlord as being self-employed; I have no other self-employment.

I currently pay N.I. via my employer but according to the tax office, you have to pay additional N.I. contributions if you are self-employed in addition to being an employee; they take the N.I. contributions via D.D. (2.10 per week). Because the profits from letting my property are less than the threshold of 4,215, I was able to apply (successfully) for an exemption certificate.

Seems a load of tosh to me too - but it's all down in black & white in Form CA 02 " National Insurance contributions for self-employed people with small earnings ".

To me, being a landlord is not exactly being self-employed; I have twice queried this with the tax office and have twice been informed that this is the case...

I can see now why I have to complete a Tax return ( as I am receiving income that is not being taxed at source, the I..R. obviously need me to state how much profit I am making from this additional income and tax me at 22% accordingly ). At the end of the day, the profit minus tax is only a few rounds down the pub :o(

Many thanks for everyones help !

Neil.

Property rental is an investment, not a business - so no Class 2 nor Class 4 NIC is payable.

In message of Sun, 17 Apr 2005, NJ writes

Perhaps, by saying you were a LANDLORD they thought you were a landlord of a pub, income from which would be subject to NI

Being a landlord of rented property is NOT subject to NI unless the income is from Holiday Lets.

DF

Most FHL are taxed under Schedule A, and should not be subject to NI. It may be that additional services could amount to a separate trade, and that would be subject to NI.

Heh, heh. Nice theory. This might be resolved by seeing which parts of the tax return he was sent. Presumably he got the main return pages (SA100) together with EITHER the four self-employment pages (SA103) OR the two land-and-property (SA105) pages. Or perhaps it was the dinky new SA200 short version of the tax return instead of all of the above.

What were you sent, NJ?

If you were sent SA100+SA103, you should leave SA103 blank and ask for SA105. Everything should then sort itself out thereafter, but you need to stop making class 2 NICs, and perhaps see about getting the ones you've already paid refunded on the grounds that they were not due and that you paid them as a result of being misadvised due to a misunderstanding.

Hi, I've only been sent a standard SA100 with Self-Employment pages SE1-4 (i.e 4 pages).

The Self-Employment form really does not seem to fit in with letting a property to be honest - questions about cars, plant & machinery, agricultural / industrial buildings allowance etc. !

I'm wondering if I need to ring the tax office yet again...

The good news is that no Class 2 NIC's were paid as I spotted the 4215 threshhold limit just before the direct debit came up.

Thanks

Neil.

Just leave the SE pages blank. Don't tick the Yes box at Q3 on page 2 of SA100, but do tick the Yes box to Q5.

Not the tax office. The orderline. Just to ask for the Land and Property pages, or alternatively download them yourself and print them out.

Or if you're feeling extremely adventurous, throw all the papers away and file online.

Yes....tricky one this though....my mortgage lender is actually my parents - they leant me approx. 40% of the price of the property (7 years ago now) and I'm paying them back a fix amount every month (200) into a Bldg Soc. account. So in effect it was a tax free loan that I am paying back. The other 60% of the cost of the property I put up myself.

I'm assuming (hoping!) I can offset this 200 monthly figure against the monthly rent received as part of the tax calculations ?

Many thanks

Neil.

Tax free or interest free?

If interest is payable, you will need to calculate the interest portion of the 200 monthly payment, as only that is allowable against the rents.

Also, have you parents included the interest in their Tax Returns?

Doh! Yes, that should have been 'interest free'.

Not good news then - as the 'mortgage' does not include any interest, I will not be able to offset much to reduce the level of tax. Terrific :o(

Anyway, thanks for you help Doug - much appreciated.

Regards

Neil.

You're welcome.

Have you read IR 150, which is the Inland Revenue's booklet on the Taxation of Rents?

You ask such scathing rhetorical questions.