It is often the case that individuals with rental properties at home or abroad may forget to tell their accountant because the property is running at a loss. This is especially the case with overseas properties bought as a holiday home but rented out when the owners are not using them.
If an owner tallies the rental payments received, deducts the interest paid out (which can be a mortgage or a buy to let loan or simply bank borrowings) together with any cleaning, decorating or minor repairs and the result shows that no profits are made it can be an easy assumption that HMRC don’t need to know, however the receipt of rental income is reportable to HMRC. If the income is under £2,500 per year it must be reported and if it is over £2,500 after allowable expenses or over £10,000 per year before expenses it must be reported on a Self-Assessment Tax Return. This is irrespective of the allowable expenses incurred.
From April 2017 the way property income is taxed will change and the allowable interest paid to the lender will not be deducted as an expense but instead given as a basic rate tax credit. This will impact on all higher and additional rate taxpayers, in addition it will push some basic rate taxpayers into the higher rates of tax.
If you have not yet registered you accumulated property losses then it is vital to take action as these losses will alleviate some of the tax which will be calculated in future years.