UK Landlord Forum / Life

Hello, I am a new landlord and my property requires some modernisation so i keep the rent low. Because of this the small profit I do make goes back into the maintenance of the house. I keep a basic spreadsheet of incoming and outgoings to monitor this. My question relates to whether or not I need to complete a self assessment tax return. The gov website says I only need to declare profit over 1k but others have told me I need to complete a return regardless of profit or not.  I would be very grateful for any advice you can offer. Thank you

Hi, it is confusing because the UK Gov/HMRC website sometimes refer to gross income (before expenses), sometimes just income and sometimes income after expenses.
The £1k also muddies the water as it is sometimes referred as tax free, when in reality it is an exemption and can only be used as an alternative to offsetting expenses, rather than in addition to (i.e. if you earn £5k in rent and offset £4k in expenses you can't also claim the £1k).

This page https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income makes it clear the £1k exemption refers to when gross income is less than £1k, and you don't need to notify anyone.   

It then says if income is higher than £1k it must be declared. This seems to fit with the general principle of taxation in that we report gross and then claim allowable deductions, and if HMRC wish they can ask for evidence and therefore check our assessment of how much tax is due (or none at all in your case).   

However this doesn't mean you will have to do a tax return. It gives two scenarios.  One is for lower levels of gross income between  £1k and £2.5k, you can contact HMRC (phone, post, online etc) - I am assuming this is an alternatve to self assessment and all reasonably clear so far.

The second is for property income over £2,500 where you are asked to register for Self Assessment. But this is where it gets a bit messy.  It doesn't say gross and if you go to this page https://www.gov.uk/renting-out-a-property/paying-tax there is more information, saying  You must report it on a Self Assessment tax return if it's:
    £2,500 to £9,999 after allowable expenses
    £10,000 or more before allowable expenses

But there seems to be a gap in the middle for people who have higher gross income but their expenses reduce to it to less than £2,500 - which I'm assuming would be you as you were referring to less than £1k profit.  Unfortunately it's not clear what you should do.  I am in a similar position to you with low rental income - I actually made a loss last year due to broken boiler  - but I already do a tax return and found it easy to do the landlord section so I just filled it in.  However if you don't need to start doing one, and let's be honest who does, I would be tempted to try the Contact us route and explain the situation. You can also phone the tax office for general advice - I believe this is informal but make sure you get anything critical confirmed in writing. 

Apologies this is so long, but I wanted to try and fully explain.   

Hello, thanks so much for your detailles response.  I shall give hmrc a ring as you suggest.  Thanks again