Ask the Expert: How do I declare tax for a new income stream?
- Credit: Archant
This week, our reader wants to know how to declare taxes on income over their personal allowance threshold. Carl Lamb of Almary Green responds.
I own half a rental property with my brother – it was our parents' house and they left it to us jointly when my mum died last year.
We expect it to bring in about £7,000 profit for the current tax year in total, to be shared equally between us.
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I work part-time earning about £10,000 a year and don't normally pay any tax but my share of the profits from the house will take me over the Personal Allowance, I believe.
How do I go about sorting out the tax I'll need to pay?
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MORE: Norwich's Pye Baker shop announces closure after four yearsAlmary Green response:
If you have income from property of over £2,500 in the tax year after the allowable expenses have been deducted, then you will need to complete a self-assessment tax return after the end of the tax year.
It's important to remember that repairs, agent's fees, insurance and other expenses such as advertising for new tenants can be deducted from your profits for tax purposes.
To start doing tax returns, you need to register with HM Revenue & Customs and complete Form SA1. You can do this either online or by post.
To do this, go to the government website at www.gov.uk/government/publications/self-assessment-register-for-self-assessment-and-get-a-tax-return-sa1. Form SA1 is for people who need to do self-assessment for reasons other than being self-employed, such as becoming a company director or receiving income from a trust or settlement – or receiving an income from UK property.
You must register by the 5 October after the end of the tax year when you started getting your property income and complete the tax return by the following 31 January.
MORE: Chapelfield restaurant closure confirmedIt's worth saying that you could reduce your taxable income by making personal pension contributions. However, you would still have to complete the tax return.