Rates & Financial News
'Get organised' on your tax return
2009-01-16
The adverts have been on television, on the billboards and on the net - but the deadline is looming ever larger. For some buy to let mortgage holders, the HM Revenue & Customs (HMRC) tax return deadline of January 31st might appear as a glorified, organisational nightmare.
Some nine million Britons are set to file their returns this year, with about one million of these being rented accommodation owners.
Buy to let mortgage borrowers may have enough on their plate amid the effects of the economic downturn, but experts have warned landlords of the importance of filling out their tax returns correctly.
Indeed, some finance industry officials over the last month have warned that buy to let could even be a target area for an HMRC clampdown.
With some 80,000 buy to let properties in the UK housing market, chartered accountant Richard Murphy told the Guardian this month: "Assume the revenue will look at buy to let in a bit more detail."
He warned landlords: "Make sure you have information to back up your figures."
A formal investigation by the HMRC further down the line would not be a welcome experience, Mr Murphy commented.
Francesca Lagerberg, the national tax office head at business and finance advisory firm Grant Thornton, recently said: "Given that January is often a financially bleak month, it would be a shame to have to incur an easily avoidable £100 penalty."
She added: "Those who plan to file online should ensure they have prepared the relevant documentation and have not left it to the last minute."
So what information do landlords need? Net income is a starter. Buy to let mortgage owners should add up the rental income garnered from their portfolio, before subtracting their 'wear and tear' or 'renewals' allowance, and their allowable expenses - which usually comprises of mortgage interest repayments.
The Institute of Chartered Accountants in England and Wales' Anita Monteith advised borrowers to request an interest statement from their buy to let mortgage lender, the Guardian reports.
Tax relief can only be claimed on interest repayments - not capital repayments, the report also noted.
Buy to let mortgage holders with a profit of £15,000 or more have to complete the full self assessment tax return, which involves filling in their figures online and having dates for the rents and expenses involved.
Landlords with a lower profit should check online for details on a shorter return, while those earning less than £2,500 who are employed just need to ask their local tax office for a P810 form - after which their tax code and payslips will handle the issue.
Investors should store away details of all the dates and rents they receive from their portfolio, as well as receipts, invoices, bank statements, rent books and income from services provided to tenants, according to the government.
Such information could prove invaluable if the HMRC requests additional details at a later date.
For those who do not always get on with computers, Ms Monteith added that landlords need not panic if their return is rejected - just print off the error message and fill out the relevant form on the HMRC's website where a suitable explanation can be provided.
"The Revenue is being quite broadminded about computer errors," she commented.
And finally, buy to let mortgage borrowers need to leave enough time on their tax returns to avoid falling foul of a potentially surprising source in relation to an internet-based application - the post.
Ms Lagerberg explained: "HMRC's online filing requires individuals to register and enrol for an account, which includes waiting for an activation pin to be posted to a home address, which can take seven days to arrive."
For the latest [mortgage rates] click here
Related News
'Get organised' on your tax return read
Landlords encouraged to compare mortgage products read
Landlords face new mortgage rates read
Repossession spike following economic downturn read
Buy to let mortgage holders benefit from rate cut read
Bank cuts rates to historic low read
Landlords urged to 'think ahead' on remortgaging read
Landlords 'urged to disclose' on tax returns read
Rents fall in London read
CML: Action required to boost lending read
Click to view the News Archive
