Declaring income from rent even though rent is not profitable

[Mitul]

Hi there,

I have two properties: 1 is my Permanent Place of Residence (PPR), and another which is on rent on a buy-to-let interest only mortgage

I have had the rental property since 2005 but have not declared any income from rent, as although i am recieving rent, i am still having to add my own funds to offset the mortgage payments for my PPR and rental property.

here are the figures:

Mortgage payment for my PPR: £430 per month

Mortgage payment for rental property: £1, 030 per month

Total mortgage payments: £1460

Rent: £1200

£1200 - £1460- = -£260 (what i'm having to pay to offset the total mortgage costs)

Do I need to declare my income in this case? if yes, please state why and whether i am likely to incur penalties from HMRC?

thanks

Mitul

[Melboy]

Yes you do and the reason being is that yes, you can show losses and claim for losses BUT it is a legal requirement that ALL rental property and income/expenses/losses are registered with the HMRC

You need to come clean because if they catch you then you will invite an in-depth investigation by HMRC.

Mel.

[snorkerz]

You need to declare all income, but your mortgage interest and most of your business costs & maintainance will be allowable against tax. This probably means no tax will be due. Still need to declare it though!

Any extra allowable expenses might be allowable against other income - worth checking.

[isabelm@isabelm.plus.com]

Rent received less mortgage INTEREST paid for the rented-out property, i.e. £1200 less £1030, = gross profit. That, less any expenses of the rented-out property, is taxable.

Any costs relating to your principal private residence are completely irrelevant. You seem to have misunderstood that. Also, mortgage payments of £1030 per month may be capital and interest, but only the interest element is an allowable expense.

HMRC are trying to track down landlords who don't declare their lettings income. Best way to avoid penalties is to submit the information voluntarily.