UK - taxable income on rental property

Question

My wife and I jointly own a house which we rented out during the last tax year. We are just completing a tax return now.

We have calculated our total income on this and our profit after deductions was approximately £1800. We are both 40pc tax payers. I'm assuming since the house is jointly owed 50/50 that we are responsible for £900 each.

On the gov website it stated "You must contact HMRC if your income from property rental is less than £2,500 a year."

I'm assuming we actually will have to pay approx £350 tax each in that case, and it seems to suggest they collect this via your PAYE rather than a self assessment, although it's very unclear.

We haven't yet got an accountant but we have already included deductions for:

• Mortgage Interest only
• All estate agent fees
• Mileage for travelling to and from the property for issues
• Professionally cleaning property before the tenants moved in
• 10% wear and tear of tenants net rent
• Landlords insurance and building insurance
• Stationary

My questions is, we had to buy 3 double beds, 3 chest of drawers and 3 wardrobes before the tenants moved in since we were moving to an un-furnished house. Can we include the purchase price of these items? We also had to do some general repairs in the house to make the house in a rent-able state.

Is there anything I'm missing which could also be deducted and is it worth us getting an accountant to help?

Answer 1

As DumbCoder mentions in a comment above, HMRC provide the definitive guide to tax on rental properties in the UK.

To address particular points:

I'm assuming since the house is jointly owed 50/50 that we are responsible for £900 each.

As a married couple, the profit is indeed split equally unless you follow the procedure for changing that.

I'm assuming we actually will have to pay approx £350 tax each in that case, and it seems to suggest they collect this via your PAYE rather than a self assessment, although it's very unclear.

Yes and no: yes, because it falls below the £3000 threshold for making extra payments through your tax code.

...And no, because the deadline for submitting your tax return for this is 30 December. So assuming you're doing your return for 2015-16, I'm afraid you've already missed that date.

10% wear and tear of tenants net rent

Yes, again assuming that this is for 2015-16. As the HMRC guide mentions, this allowance will no longer be available in future years. Instead, you can claim for replacement of furnishings.

Can we include the purchase price of these [furnishings]?

No; they're specifically excluded under "capital expenditure" in the HMRC guide.

Is it worth us getting an accountant to help?

That's your call. For me, I use an accountant because I feel the cost outweighs the risk of getting things wrong - plus if you're lucky, they may spot an expense which you hadn't thought of. On the other hand, that may be overkill if your tax affairs are pretty straightforward.