Getting the tax sorted on our studio flat rental has always been a real pain. Don't get me wrong, I have no problem with paying what I owe, especially on rental income as it's not even earned, but I do object to the waste of time trying to find out what we need to do and when we need to do it. Especially as this seems to depend on the personal viewpoint of the officer on the other end of the phone, rather than a properly defined process.
Because our income from the flat is a fairly small amount and we split it between the two of us, we are below the threshold for needing to fill in a self assessment form (£10,000 net pre deductions and/or £2,500 net after allowable deductions). This is good news on one hand as we don't have to worry about the forms, but bad from another as sometimes (depending on the tax officer we happen to speak to that year) we end up having to do the work of supplying all the documentation anyway, along with an accompanying letter. This takes more time than filling in the form would have done and has been known to generate months of letters back and forth as they ask supplementary questions, eventually deciding we don't owe them anything anyway.
Up until this year that is. We paid the mortgage off last December and so no longer have the mortgage interest as an expense to offset against the tax. In tax year 2014/15 we are actually making a profit! Along with the fact that our letting agent expenses have shrunk enormously this year and we have gained control of the whole process, this means that I finally feel that the flat is a reliable asset in our income strategy. It is a very good feeling.
We phoned up the tax office this week and gave our estimates for how much profit we think we will make this year having offset the allowable expenses (letting fees, service charge, 10% wear and tear and the costs for the maintenance we've carried out). We were both lucky and got through to officers who were prepared to take the figures over the phone and simply adjust our PAYE codes so the job was done there and then.
Fingers crossed for next year.