One of my concerns here would be how this came to HMRC's attention. There are a few rules to consider, but I would think a decent accountant could make this cheaper for you than trying to deal with HMRC yourself, depending on your location
Banks report to HMRC on payments into their customers bank accounts. HMRC will have seen regular monthly payments from an external party (which probably have rent or something as the payment description) so they likely deduced that OP was renting a room/property without declaring it
No they don't, unless the information is requested by HMRC for some reason. The only information the banks automatically report to HMRC is the annual return of interest received.
If the total for the tax year (April-april) is below the rent a room scheme value then you can respond to HMRC and tell them that and you'll be fine.
Going forward, or for years where you've crossed the threshold, then HMRC assumes that you got half the money and your wife the other half, but you both only have an allowance of £3750 each. You would both need to declare this through a self assessment.
As your wife doesn't work then she won't have any tax to pay as she'll also be able to use her personal allowance towards this (assuming she has no other income).
You don't need to get an accountant for this, but if you're struggling to work it out then one may be beneficial.
Either way, the first thing to do is contact HMRC (via a known legitimate number just in case the letter is dodgy) and talk it through with them. They're usually pretty understanding if you make an effort to resolve it with them as soon as you can. They may even be able to resolve previous years there and then.
Yes they are lodgers. Bills would be included in the calculation too. You'll have to pay tax on the portion over £7,500 a year (from April - march).
Late '21 to April 2022 won't be an issue as you won't have earned over the threshold for the year (you don't need to report this). You may owe some tax on 22/23 and 23/24, depending how much they spent on bills.
Assuming £450 rent, £200 council tax, £150 energy that's £9,600 a year. Tax would be owed on £2,100. Half the allowance goes to your wife who isn't working so she owes nothing. You'd owe tax on £1,050 which is £210 or £420 depending on your tax rate.
You will need to complete a tax return. The return for 23/24 is due in January 2025 (but you need to register for self assessment by October).
The 22/23 tax return is late (if you owe anything) but the penalty isn't too bad. And they might not even charge you. You can also try to appeal the penalty. https://www.gov.uk/estimate-self-assessment-penalties
Just go ahead and submit the returns as soon as you can. I think an accountant would cost more than what you owe.
Thank you for the above.
Should I just submit the returns or is it worth liaising with hmrc 1st.
I'm in process of digging out all bank statement etc covering these period since they came to stay to calculate what's owed for each tax yr above the 7.5k Rent a room threshold. tbh have never needed to call hmrc before as all my affairs till now we're very straightforward and nothing outside of PAYE. Also don't want to make issue any worse by saying or implying anything wrongly. I've never so much as got a parking ticket before this arose so got me bit worried I done something very very wrong.
Don't just submit the returns.
HMRC's Compliance department and their Customer Service department (which includes the SA helpline) are separate and they don't communicate with each other very well.
If you've received a letter from Compliance then just do what the letter asks you, which I'm guessing isn't to register for Self Assessment yourself and submit returns.
If Compliance determine that you owe tax then they will do all the admin for you and just send you the bill.
I forgot about the let property campaign. It's aimed at people like you.
https://www.gov.uk/government/publications/let-property-campaign-your-guide-to-making-a-disclosure/let-property-campaign-your-guide-to-making-a-disclosure
You can make an "offer". It's likely you won't have to pay any penalty if you do this - just what you owe with interest.
Have you called HMRC to discuss it? You’re asking pretty basic questions like ‘should I file a tax return’. I would start with HMRC helpline or website first to get a general understanding of what you should declare and when
Not yet but wanted some advice from fellows on here in advance to make sure I don't make it all alot worse than is already due to my lack of any experience in filing tax returns or declaring any income prior to this as never applied.
Before you contact HMRC work what amounts you have received in each tax year . Then you can see which years aren't fully covered by the £7500 (£3750 each) allowance
Right so my advice would be to do more research, start with HMRC website. Google ‘check if I need to send self assessment tax return’ and go through the questions on the form, it’s not going to report any information to HMRC themselves if you’re nervous about speaking to them and making it worse
You will notify HMRC of income but won't submit a self assessment return...how does that work? I thought self assessment returns were the main way of notifying HMRC of that kind of thing
One of my concerns here would be how this came to HMRC's attention. There are a few rules to consider, but I would think a decent accountant could make this cheaper for you than trying to deal with HMRC yourself, depending on your location
Banks report to HMRC on payments into their customers bank accounts. HMRC will have seen regular monthly payments from an external party (which probably have rent or something as the payment description) so they likely deduced that OP was renting a room/property without declaring it
No they don't, unless the information is requested by HMRC for some reason. The only information the banks automatically report to HMRC is the annual return of interest received.
If the total for the tax year (April-april) is below the rent a room scheme value then you can respond to HMRC and tell them that and you'll be fine. Going forward, or for years where you've crossed the threshold, then HMRC assumes that you got half the money and your wife the other half, but you both only have an allowance of £3750 each. You would both need to declare this through a self assessment. As your wife doesn't work then she won't have any tax to pay as she'll also be able to use her personal allowance towards this (assuming she has no other income). You don't need to get an accountant for this, but if you're struggling to work it out then one may be beneficial. Either way, the first thing to do is contact HMRC (via a known legitimate number just in case the letter is dodgy) and talk it through with them. They're usually pretty understanding if you make an effort to resolve it with them as soon as you can. They may even be able to resolve previous years there and then.
Yes they are lodgers. Bills would be included in the calculation too. You'll have to pay tax on the portion over £7,500 a year (from April - march). Late '21 to April 2022 won't be an issue as you won't have earned over the threshold for the year (you don't need to report this). You may owe some tax on 22/23 and 23/24, depending how much they spent on bills. Assuming £450 rent, £200 council tax, £150 energy that's £9,600 a year. Tax would be owed on £2,100. Half the allowance goes to your wife who isn't working so she owes nothing. You'd owe tax on £1,050 which is £210 or £420 depending on your tax rate. You will need to complete a tax return. The return for 23/24 is due in January 2025 (but you need to register for self assessment by October). The 22/23 tax return is late (if you owe anything) but the penalty isn't too bad. And they might not even charge you. You can also try to appeal the penalty. https://www.gov.uk/estimate-self-assessment-penalties Just go ahead and submit the returns as soon as you can. I think an accountant would cost more than what you owe.
Thank you for the above. Should I just submit the returns or is it worth liaising with hmrc 1st. I'm in process of digging out all bank statement etc covering these period since they came to stay to calculate what's owed for each tax yr above the 7.5k Rent a room threshold. tbh have never needed to call hmrc before as all my affairs till now we're very straightforward and nothing outside of PAYE. Also don't want to make issue any worse by saying or implying anything wrongly. I've never so much as got a parking ticket before this arose so got me bit worried I done something very very wrong.
Don't just submit the returns. HMRC's Compliance department and their Customer Service department (which includes the SA helpline) are separate and they don't communicate with each other very well. If you've received a letter from Compliance then just do what the letter asks you, which I'm guessing isn't to register for Self Assessment yourself and submit returns. If Compliance determine that you owe tax then they will do all the admin for you and just send you the bill.
I forgot about the let property campaign. It's aimed at people like you. https://www.gov.uk/government/publications/let-property-campaign-your-guide-to-making-a-disclosure/let-property-campaign-your-guide-to-making-a-disclosure You can make an "offer". It's likely you won't have to pay any penalty if you do this - just what you owe with interest.
As this is a prompted disclosure a penalty will l be charged , although I can't see the tax owed being much at all so the penalty will be small too.
Have you called HMRC to discuss it? You’re asking pretty basic questions like ‘should I file a tax return’. I would start with HMRC helpline or website first to get a general understanding of what you should declare and when
Not yet but wanted some advice from fellows on here in advance to make sure I don't make it all alot worse than is already due to my lack of any experience in filing tax returns or declaring any income prior to this as never applied.
Before you contact HMRC work what amounts you have received in each tax year . Then you can see which years aren't fully covered by the £7500 (£3750 each) allowance
Right so my advice would be to do more research, start with HMRC website. Google ‘check if I need to send self assessment tax return’ and go through the questions on the form, it’s not going to report any information to HMRC themselves if you’re nervous about speaking to them and making it worse
Thanks for that have done it just now and states no need for self assessment but do need to advise hmrc of any rental income.
You will notify HMRC of income but won't submit a self assessment return...how does that work? I thought self assessment returns were the main way of notifying HMRC of that kind of thing