Yet another nudge letter has been sent out recently by HMRC which some taxpayers should not ignore. There will be some taxpayers who may be in a position to rent a whole house out but others may only be able to let out a single room.
Taxpayers need to think about a number of things. Firstly, do you need tell HMRC that you are receiving such income and secondly, is that income taxable.
Moreover, as with most other nudge letters, taxpayers should seek advice and not simply sign the attached Certificate of Tax Position and post it back.
Why has HMRC contacted me?
HMRC receive a wealth of information from a variety of sources including “well wishers” – former disgruntled employees, tenants, neighbours etc.. HMRC will undertake some checks including the use of Connect on HM Land Registry records.
Do I need to report such income?
There is guidance on HMRC’s website. It depends upon all the relevant facts. For instance, if the taxpayer already has to complete and submit a Tax Return annually then perhaps it can be included and expanded if necessary by using the “white space”.
If the matter is more complex and you need to make a Disclosure, seek specialist advice before you do.
Is the income taxable?
It depends on the level of income you receive. The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property.
If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income.
The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.
What should I do next?
Don’t ignore the nudge letter as invariably HMRC will write to you again stating that you are now under investigation.
Gather together all the relevant documentation and put it in order and then seek specialist advice before responding to HMRC.
If you have any income or gains that you need to declare, please contact me.