Tax credit

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    Tax credit

    Hi Folks

    Another new member here, hello to all.

    I hope this has not been covered before as I cannot find it any where.

    I am renting out a property and not long since contacted inland revenue for tax for 2017/18. I am a basic rate tax payer and have an interest mortgage on the property. I am aware that the tax relief rules have changed and are going up incrementally form this year. It is my understanding this is to get more return from higher rate tax payers?
    Anyway the inland revenue have informed they they will take a straight 20% from the profit declared from my wages. It was my understanding that a tax credit would then be credited to compenstae, however I cannot see this being done. Can anyone clarify if this is this case and at what stage this would be carried out?

    Also can anyone confirm if a£1000 property allowance is still in place where this amount is tax free from the first thousand in profit? I spoke with someone from the inland revenue regarding this, they could not give me an answer so I did not take this into account, worrying that it could be wrong.

    As as you can tell from the above I am inexperienced in this area and really became a landlord by accident. We wanted to move to another area as a family but my partner did not wish to sell the original house we were in as her Father had built it and she had emotional ties to it. Renting this property was the only solution. If it had been my decision alone I would have sold up completely and bought what we could afford outright as we moved to a less expensive area.

    Anyways, any help would be appreciated.

    FF

    #2
    That's not possible, as Inland Revenue hasn't existed for a long time.

    It sounds like they are adjusting your tax code, which is a very standard way of dealing with relatively small under-taxations.

    I think you will need to fill in a tax return, but they will ask you for gross pay and actual tax, from the P.60. They'll then calculate the tax you should have paid for everything and compare it with the tax actually collected, and make adjustments, if they don't match up.

    Comment


      #3
      leaseholder64 Thanks for your reply. Okay yes I'm living in the past😀HMRC. The profit is so small that I don't need to do a tax return apparently. The point I wanted to check was do I receive a credit at any stage from HMRC. As far as I can work out, if a person is a lower tax payer then this change should not affect them financially?

      Also, can anyone clarify if the first £1k profit is an allowance and tax free?

      Thanks

      FF

      Comment


        #4
        No such thing as a 1000 profit exemption. You are thinking about interest on savings.

        Not having to do a tax return is not the same as not having to pay tax. And the requirement to do a tax return depends on income (and other things) not profit.

        Are you sure you are calculating your profit correctly? It is the mortgage interest only not the full mortgage. Unless you are involved in some big losses and repairs it is most unlikely you will be making less than 1K profit/year and HMRC will likely investigate -- it is not worth the risk.

        Some numbers would be interesting.

        Comment

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