Let property campaign letter

[abcdefg]

I received a letter from HMRC today and am not sure what to do next. Obviously I'll ring them on Monday when they re-open but I'm totally in the dark with all of this.

Situation is currently that I live in my Buy-to-Let property and am not a Landlord.

I owned a house, ex partner owned a house, when heavily pregnant decided to move into a house together, was quicker and easier at the time to let our respective houses than sell them and change the mortgages to buy to let joint ones. I became an accidental landlord! 6 years later the relationship ended, we weren't married, he stayed in the family home, I moved into joint Buy-to-Let that was formerly his house and sold my previous house. I didn't work throughout the 6 years, paid no tax, declared no tax, received just child benefit and lived on his wage. He did self assessment for some of that 6 years, I really didn't take any notice of the finances, he sorted out the tenancy stuff and dealt with the tenants and signed documents etc.

I've lived in this Buy-to-Let for over two years now, work part time on minimal wage, it's not ideal obviously but the family home is for sale and I'm not able to put this property into my sole name at present. It is not amicable and we attend financial mediation sessions to figure out how to divide it all up!

Obviously I'll pay any tax that I owe, but really don't know where to start or what to tell HMRC to be honest. I don't have any paperwork. Am I best to approach an accountant in the first instance and before contacting HMRC? If so, where do I find one, is there a certain type to get? Any help or advice would be much appreciated

[jpkeates]

If I've followed correctly:

During the period when you were (with your partner) renting two properties you were receiving an income (as was your partner).
You should both have been making annual declarations of your income to HMRC (which would probably have been self assessment tax returns).
Whether or not any tax was due would depend on your particular circumstances.

If any tax was due, HMRC are going to want it, plus interest and late penalties.
However, unless the rent (less any mortgage interest) was high it shouldn't be that much if you had no other income.
If half of both rents was (wild estimate) £1,000 a month and you were paying £300 interest a month, your annual tax would probably be almost zero.
Your ex-partner may not be so lucky if they were working.

When you sold your (previous) house, any increase in value (in the years you were renting) would be taxable as a capital gain.
How much depends how much in increased in value while it was being rented (take any total increase, divide it by the number of years you owned it in total and multiply by the number of years it was rented less 2.)
That's a rule of thumb, it will actually be worked out the to day.
There's other reliefs, so unless it's tens of thousands you might be OK.

Your partner's BTL lender may not be happy unless you are genuinely paying market rent for the property you are now living in, and I would be tempted not to let anyone know.

If you can afford an accountant it might help, but I suspect your partner may actually be in a worse position than you.
A local accountant will usually give you (both) a free meeting to discuss your situation before giving you an estimated cost.
This is pretty bread and butter.
I'd try a local firm with an office above the high street / down a side street - you want an office with 3 or 4 people in it that can see you in few days.

[abcdefg]

Thankyou jpkeates, yes you followed that correctly and your figures were spot on too, your reply is very helpful indeed.

I told the BTL lender that I was living in that house just last week, maybe I shouldn't have but hey ho, I wonder if that's what triggered something and hence I received that letter yesterday. The sold property sold for less, so no Capital gain with that.

I shall seek an accountant, never used one before and quite worried about the cost of all of this. I'm quite embarrassed about the thought of owing money to anyone and am not in a financial position to owe lots, but will have to face it head on I guess. Great timing with Christmas around the corner :-/ I presume I would be able to do this on an individual basis though would I, as it was an unamicable separation? I presume he would also have received the same letter that I have too. Thanks again

[jpkeates]

The campaign is a big HMRC initiative, I doubt it's anything to do with the lender,
they've been getting agents to tell them who they pay rent to and mining their own data for people with multiple properties.
Turns out they run the agency that allocates council tax values, so they have all the ownership data they need - very convenient.

You probably don't owe anything/much and yes it's only your return you're bothered about.
The "risk" is if you say "x" and ex partner says "y" - your best bet is to be honest (as you are probably OK in this case).

Don't worry about being embarrassed, you're not the first to be in this situation (HMRC are funding a vast campaign from the tax they'll collect from people in exactly your position).
Accountants are used to it!

[Hippogriff]

If not sure what to tell HMRC - just go with the truth, even if relatively complicated. Which I suspect you will anyway. It seems that when you originally let your houses you [both] did the right stuff in changing them to BTL mortgages, so it doesn't look you set out to beat the system as a whole... more just that events overtook you somewhat. The thing that I didn't get is why the BTL you're living in now wasn't converted back to a residential mortgage 2 years ago instead of last week, should've been cheaper? Anyway, as said, if you weren't working and you didn't have 50 properties it's very unlikely any personal exposure would be massive.

[abcdefg]

.............The thing that I didn't get is why the BTL you're living in now wasn't converted back to a residential mortgage 2 years ago instead of last week, should've been cheaper?.....

It hasn't been converted back to a residential mortgage, it's still a BTL in joint names with the ex!
It's not ideal, in fact I dislike it immensley, but I'm a bit stuck in it really, it was going to be a temporary situation until I got myself sorted out. I'm not able to get the property in my sole name as a residential mortgage as the ex won't agree to that as we're going through financial mediation pending a court case to divide up our assets etc ...... all a bit of a mess isn't it! :-/