Income you receive from letting a property must be declared to HMRC, and you should also claim any qualifying associated expenses related to that letting. There is a £7,500 annual allowance to cover income from letting a room in your own home to a lodger, but other rental income must be declared. This applies even if you didn’t set out to make a profit from your property, such as in the following situations.
People serving in the armed forces and those who work for multinational companies may be required to relocate to another country for significant periods. Where their UK home is let out the rent should have tax deducted by the letting agent, or tenant, under the non-resident landlord scheme, unless the landlord has been granted gross payment status under that scheme. The landlord also needs to declare the rental income on their UK tax return.
Pub landlords who live above their pub may let out their former home. Even if the rent income only covers the mortgage payments on their own property, the whole amount of income and expenses must be declared on the owner’s tax return.
Parents may buy a property for their offspring to live in while at university. Where the property is also let to other students, who pay rent to the parents, that income must be declared on the parents’ tax returns. As the property is not the main home of the parents the rental income doesn’t fall under the £7,500 rent-a-room relief exemption.
An individual may partly fund the cost of their accommodation in a residential care home by letting their former home.
Although all the rental receipts are used to pay for the care home fees, the rent must be declared on the recipient’s tax return and tax will be payable on the profits.
Where you haven’t declared rental income correctly you can make a full disclosure to HMRC, and pay the tax due without fuss. This can be done by amending your last tax return, or if the non-declaration goes back a few years, use HMRC’s Let Property Campaign service. Talk to us if you’re affected.