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Notification of Rental Income

I started renting out a property a number of years ago, and due to the fall in interest rates have begun to make a profit. In previous years I have always lost money. I haven’t received a tax return to fill in as I am in PAYE employment. Should I wait until I get a tax return from the Inland Revenue to let them know about the income?

If a taxpayer receives any taxable income in a tax year of which HM Revenue & Customs is unaware, then they have a legal duty to “notify of chargeability” by 5 October following the end of the tax year in which the income was received. Notification can take the form of a letter to your tax office, or a telephone call.

If the amount was £15,000 or less, then they are likely ask for a 'short' tax return to be completed, and if the income is less than £2,500 HMRC can make an adjustment through your tax code.

You also mentioned that you made a loss on the property in the last year. You should still notify HMRC of the position, as you will benefit once you begin to make a profit from the rental business. By completing a tax return, HMRC will receive a note of the loss you have made, and relief can be claimed for this once you have made a profit as it can be set against your first available rental profits in future years.

Even if you were set up under self assessment and have already submitted a tax return, you can submit a revision to the land and property pages within 12 months of the filling deadline for the tax return to declare the loss.  If the time limit for revisions has passed, then you can submit a revised tax return under the error or mistake provisions and hope that the Revenue accepts this late revision.

However, do not be too surprised if you find the Revenue opening an enquiry into your return as a result of the submission, as they will want to know when the letting of the property commenced and may take the opportunity to review all aspects of your return.

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