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Landlords and tax on rental income


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I've often wondered, and yesterday heard this from daughter.  She has a friend who's a doctor, quite senior, and has some hefty expenses looming.  She also has a London flat she has rented out since moving to the area. 

She was discussing finances with another doctor, who asked whether she paid tax on her rental income.  She said yes, of course, she couldn't sleep at night otherwise. 

Other doctor's reply was basically, 'Then you're mad.  We never have.'  

This must be so common - I do wonder why on earth no govt. has cracked down on it. 

Who on earth is to know if you don't?  AFAIK there is no system at all for registering who rents what out, and the SA tax form asks only how many properties and what the rent is - it doesn't even ask for addresses. And who's to know even if you declared rent with a good percentage knocked off?  

 

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Without trying to highlight any particular demographic, as I'm sure it's prevalent all over. 

My friend at work (who is Asian) and himself rents out properties on residential mortgages says that within the Asian community, its common practice to put properties in extended families names on residential mortgages. He doesn't know anyone that will be effected by the BTL changes.

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I've often thought that this is exactly the type of activity that should be privatised or offered to joe public on a reward basis.

HMRC are just not set up to dig into these details. Publish the tax return of anyone renting out property [job for deposit protection folk, they do sod all else to collect their dosh]. Then offer joe public 10% of any unpaid tax collected from the errant landlord.

Suspect that would get a few votes not only on here but also in general.

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People just need to snitch on these tax evaders. If HMRC find out the back-tax is multiplied by a factor of 2 to 3 depending on various factors. Plus there is a chance of a prison term and deportation for non UK nationals (even if EU). We also have a resident tax evader on these boards who I have mentioned to HMRC

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10 minutes ago, sideysid said:

Without trying to highlight any particular demographic, as I'm sure it's prevalent all over. 

My friend at work (who is Asian) and himself rents out properties on residential mortgages says that within the Asian community, its common practice to put properties in extended families names on residential mortgages. He doesn't know anyone that will be effected by the BTL changes.

It is clear form this and other boards (TMF) that a large proportion of Asians are tax evaders (thieves). No excuse with culture; if they cant abide by British values they need ot be sent back to their country of origin

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Hammonds budget was of course hilarious with his talk about fairness and equality [NI].

Be a [decent] landlord with 5 or 6 pwopertees, no mortgage, 35-40k gross but do all the letting agents and odd job maintenenace yourself. It's a very-low-hour part time job and you pay 20% tax+NI [0], laze in bed a wwhile, get up and read the paper, off to the gym, lifestyle choice. Be a hard working white van man and every sale will have 20% VAT taken off the top with 31% tax + NI on all your earnings. Up from 29 to make it all equal?

Ignoring the VAT, white van man with 36.5k gross pays almost 3k more in tax+NI than the lazy landlord on the same gross. Including the VAT it's over 10k more.
Very fair and equal from the landlord chancellor then.

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I always imagined those who pay it must be in the minority. But how do HMRC ever find out? Surely in this age of big data and the snooper's charter it isn't too much to expect that they can create a database of rental properties and see who to go after for unpaid tax? Easy money, you would have thought.

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1 hour ago, ebull said:

I've often thought that this is exactly the type of activity that should be privatised or offered to joe public on a reward basis.

HMRC are just not set up to dig into these details. Publish the tax return of anyone renting out property [job for deposit protection folk, they do sod all else to collect their dosh]. Then offer joe public 10% of any unpaid tax collected from the errant landlord.

Suspect that would get a few votes not only on here but also in general.

I would just have a register of houses that are rented out and ask people to report others.

I would also have the same for people who get sickness benefit so you can report the gym bunny who gets benefits because they can't walk.

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1 hour ago, Gribble said:

It is clear form this and other boards (TMF) that a large proportion of Asians are tax evaders (thieves). No excuse with culture; if they cant abide by British values they need ot be sent back to their country of origin

Hahaha! 

Sorry, this is such a stupid comment. 

You're aware that 'British' (white) people fiddle their taxes as well, right?  What shall we do with them? 

And I'd guess that there maybe 3 times as many British Asians born in the uk as there are first generation immigrants from asia

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Every tenant pays a deposit.

Every deposit is protected in one of only a handful of deposit protection schemes. It is an offence not to do so.

Match the registered deposit against declared rental income.

Job done.

Come on HMRC! What are you waiting for? Or is this queued up in your in-tray behind self-certified mortgage fraud?

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9 minutes ago, Foreverblowingbubbles said:

Hahaha! 

Sorry, this is such a stupid comment. 

You're aware that 'British' (white) people fiddle their taxes as well, right?  What shall we do with them? 

And I'd guess that there maybe 3 times as many British Asians born in the uk as there are first generation immigrants from asia

I have to say that I also don't think talking about the racial origin of tax fraudsters is helpful.  Particularly since there is a large amount of tax evasion from all races. 

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30 minutes ago, Bruce Banner said:

HMRC are in no hurry as they can go back 20 years and charge penalties and interest. 

But how many ever get caught?  You hear of so many cases - it would seem that most are blithely confident of getting away with it long term.  If LLs were commonly caught out it would surely get around and put the frighteners on the non payers. Or at least some of them.

I don't suppose anything much would scare off the criminal/semi criminal slumlords who cram them in and demand cash in hand rent - except maybe massive fines and confiscation of their properties.  Or at least, the massive fines + being banned from renting properties ever again.  

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Just now, fru-gal said:

I don't think HMRC or the Government really care about LLs paying tax, afterall, many of them are LLs and turkeys don't vote for Christmas. If they really cared there would be a national LL Register and lots of other things to link a LL to a property. Their "Big Data" is probably a bit of a "emperor's new clothes" and the whole tax take is based on scaring the middle classes who are generally honest and paying tax into believing that HMRC has all these powers and actually uses them when in reality it is much less hard work and less costly than going after those who don't declare and real criminals.

Bit of a gamble given there may be housing benefit (paid direct in some instances), and current or archived listings on Zoopla which may also make a subsequent sale look interesting from a CGT perspective if it is claimed to be a primary residence. The deposit protection scheme also is a snapshot of current tenancies.

We know there is a huge discrepancy between numbers declaring rental income and the number of BTL mortgages in existence; I really don't think it would be a huge job to legislate for the identities of properties subject to BTL mortgage charges to be handed over to HMRC, or indeed for a trawl of the Land Reg title database to look for owners who are not in residence.

For those more under the radar, it could be as simple as local housing types calling private ad numbers to view, then take it from there- land Reg.

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16 minutes ago, fru-gal said:

I don't think HMRC or the Government really care about LLs paying tax, afterall, many of them are LLs and turkeys don't vote for Christmas. If they really cared there would be a national LL Register and lots of other things to link a LL to a property. Their "Big Data" is probably a bit of a "emperor's new clothes" and the whole tax take is based on scaring the middle classes who are generally honest and paying tax into believing that HMRC has all these powers and actually uses them when in reality it is much less hard work and less costly than going after those who don't declare and real criminals.

Exactly this.

If they've made such faff of Universal Credit, how can anyone reasonably expect they'll be have the capacity to go after individuals.

You see flag waving cases in the media, buts that's generally after they've got snitched or caught out on something entirely unrelated.

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19 minutes ago, fru-gal said:

I don't think HMRC or the Government really care about LLs paying tax, afterall, many of them are LLs and turkeys don't vote for Christmas. If they really cared there would be a national LL Register and lots of other things to link a LL to a property. Their "Big Data" is probably a bit of a "emperor's new clothes" and the whole tax take is based on scaring the middle classes who are generally honest and paying tax into believing that HMRC has all these powers and actually uses them when in reality it is much less hard work and less costly than going after those who don't declare and real criminals.

Err, HMRC really does care about people paying tax.

Have a chat to an unleveraged LL about if HMRC gives them a pass on tax. They dont.

Due to being able to offset mortgage IR against rent, there's been no tax liability for the hordes of overly leveraged  IO BTLers.

Now, with the the exception of mortgage IR releif being removed there is a tax liability.

 

 

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2 minutes ago, sideysid said:

Exactly this.

If they've made such faff of Universal Credit, how can anyone reasonably expect they'll be have the capacity to go after individuals.

You see flag waving cases in the media, buts that's generally after they've got snitched or caught out on something entirely unrelated.

UC was a badly thought outght benefit system thought up by the DWP.

Its nothing to do with HMRC.

HMRC are only concerned about tax collection.

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1 minute ago, spyguy said:

Err, HMRC really does care about people paying tax.

Have a chat to an unleveraged LL about if HMRC gives them a pass on tax. They dont.

Due to being able to offset mortgage IR against rent, there's been no tax liability for the hordes of overly leveraged  IO BTLers.

Now, with the the exception of mortgage IR releif being removed there is a tax liability.

 

 

Yes, I've wondered if this has been partly the issue- slim pickings in many instances.

 

However, now that the nation's leveraged landlords are going to see a real upswing in their fortunes, from a taxable income perspective, courtesy of S24, well, it's only fair that they pay their dues.

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9 minutes ago, The Knimbies who say No said:

Yes, I've wondered if this has been partly the issue- slim pickings in many instances.

 

However, now that the nation's leveraged landlords are going to see a real upswing in their fortunes, from a taxable income perspective, courtesy of S24, well, it's only fair that they pay their dues.

I think there may be a nice petition list somewhere if they are looking for a place to start :D

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Most landlords dont fill in tax returns and are confident they wont get caught. Tbf, I'm confident they wont get caught either which is frustrating from an equality point of view. A teacher who has never done a self assessment in their life isnt going to start filling one in just because they have a BTL or two.

There are also those who complete tax returns but take mick with allowable expenses.

Thus, S24 is of little relevance for them.

 

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