Leanne1812 Posted February 23, 2008 Report Share Posted February 23, 2008 Hello forum, I am in a bit of a pickle and want to sort out my finances. My husband and I own 2 BLT properties. The 1st we bought in 2001 and the 2nd in 2003. We have never declared these properties as we used equity release to purchase them. The problem is we would like to expand our portfolio and feel we should be getting everything in order. The rental income for both is £800 and mortgage payments are just over £500. We have made improvements to both and spent a fair amount, new boiler and windows, outside render etc. I know we can declare what we've spent and it will be deducted from any tax owing but it's just taking the steps and getting everything organised and legal. My husband is self employed and I work for him earning £80p/w. Since I am under the tax threshold can I use some of the profit as my earnings if you like? As you can probably tell we are completely unsure of the financial implications in this situation. Can anyone advise if this means big trouble or should it be straightforward to sort out? Many thanks for any advice. Leanne Link to comment Share on other sites More sharing options...
GPEL Posted February 23, 2008 Report Share Posted February 23, 2008 Have you tried an anomynous call to the Inland Revenue helpline (own number witheld)? They are usually pretty good with the advice and should give general guidance about retrospective submissions. Link to comment Share on other sites More sharing options...
Selkirk Posted February 24, 2008 Report Share Posted February 24, 2008 Good advice from GPEL - and do it sooner rather than later, I read somewhere the IR are making this type of thing a priority and they can go back and do you for the whole lot. I would also suggest to employ an accountant who knows this area. cheers Link to comment Share on other sites More sharing options...
Leanne1812 Posted February 24, 2008 Author Report Share Posted February 24, 2008 Thanks a lot guys, I will bite the bullet and phone 1st thing in the morning. It just seems oh so complicated. I think because we used equity release and all the mortgage debt is on our own home it may mean there's not much tax relief to be deducted from the full years rent which equates to £9600. Any suggestions? Leanne P.S. Already have an accountant so will have a chat with him and see what he says, thanks again. Link to comment Share on other sites More sharing options...
Simon Dewsberry Posted February 24, 2008 Report Share Posted February 24, 2008 If the cost of the BTL is borrowed against your home residence and you are paying interest on that money then you are entitled to offset the interest against rental income in the same way as any other mortgage on the BTL property. Link to comment Share on other sites More sharing options...
GPEL Posted February 24, 2008 Report Share Posted February 24, 2008 Not sure about this. 9.6K rental for 1st year income less interest only element of any mortgage, less purchase costs, solicitor fees, survey stuff and so on. Did you buy both with 100% cash released from own home, much better to put minimal deposit down, buy as many as possible and take max interest-only borrowing to use full tax benefits etc etc. Greatest returns came from using the least amount of capital. EG 15% down and 15k growth on 100k property gives 100% return on investment which is much better than return of 15k return on 100% down over same period. Sack your accountant, he/she should have already advised you most appropriate route, unless you witheld information. Link to comment Share on other sites More sharing options...
plym77 Posted February 26, 2008 Report Share Posted February 26, 2008 Hi Leanne FYI I am a Chartered Tax Adviser. Did you not declare the properties to the accountant? Did they not have to give accounting references for your husband for mortgages? As you have an accountant there is no real point in me detailing all the issues as I expect he has or will already go through them with you, but my advice is to get everything up to date - voluntary disclosure is the best policy, rather than waiting to be found out. This is likely to reduce potential penalties. In my experience they often catch up with you eventually, if not while renting, it is likley on the eventual sale. HMRC are checking the likes of TR1's and Stamp Duty Land Tax forms etc more and more as they are discovering that this is a good source of information. Also, take a look at the property income manual to ensure you are claiming everything you can: http://www.hmrc.gov.uk/manuals/pimmanual/index.htm You should also ensure (as GPEL mentions!) that you are maximising your loan interest planning and also ensure that your income splitting between you and your husband is effective. Another 'off topic' - you are receiving £80 per week salary? Presumably this is for secretarial services etc and your husband is higher rate? This is fine and he is getting a deduction I expect against his business - but why £80?! If you were instead paid slightly more and were paid at the lower earning limit you would still be earning below employers and employees NIC threshold (and excluding other income, for example rental or bank interest you would also be getting less than your Personal Allowance - therefore the PAYE records for you will be minimal) and therefore no 'physical NIC' would be paid, however you would be earning NIC credits towards contributory benefits - for example future state pension. I have to agree that perhaps you need a frank discussion with your accountant as I am not entirely sure you are getting the best benefit and most tax efficient position from what you have said so far. Hope this helps Regards Sherena Glanton CTA sherena.glanton@target-accountants.com Direct Dial 01225 486 359 Link to comment Share on other sites More sharing options...
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