Have you got a property that you rent out? Maybe you and your partner both had flats when you met, and you’ve kept one on as an investment? Or perhaps you inherited a house from a relative?
However you came by your second property, if you rent it out there are a few things you need to do – and this includes telling HMRC about any profits or losses you have made. To ensure you don’t just stay within the law, but actually use it to your financial advantage, Ruth from Vanilla Online Accountancy shares her expert advice.
Telling HMRC about your rental property
Whether you have made a profit or not on your rental property, you need to let HMRC know that you have received an income from it by the 5th October following the end of the tax year in which the income started.
Why it’s in your interest to tell HMRC about your losses
If you have made a profit, you may need to register for self assessment and complete a tax return – and pay any tax due on it. But it’s just as important to tell them about any losses.
Any losses you make on your rental property can be ‘carried forward’ and offset against profits you make in future years, reducing your future tax bills. But to be able to do this, you must report your losses to HMRC through a self assessment tax return.
There’s a small window of a few years in which you can do this retrospectively, but if you wait until you are making a profit it may be too late to register all of your previous losses. So if you haven’t already done so, it’s important to report them now.
Report your losses and save money in future
A lot of people don’t report their losses to HMRC as they feel that with no tax to pay there is no need. However, by doing so you may pay more tax than is necessary in future, so it’s well worth the hassle of reporting it now!
If you would like some help with losses on rental property, including claiming for previous years, contact Ruth through Vanilla Online Accountancy and she’ll be happy to help.Ruth Anscombe