Earlier this week the HMRC announced that they are launching a new online tutorials aimed specifically at those who work in the private rental sector. A few years ago it was revealed that the HMRC was owed millions of pounds by those in the private rental sector as many landlords had failed to fill in their self-assessment forms properly. So what does the HMRC’s new scheme mean for landlords and how can you stay on the right side of them?
The Issue of Missing Tax Payments
Everyone knows that there is a housing crisis in the UK at the moment, which means that the government needs to receive all the money it can in order to fund construction projects along with other schemes to improve the UK’s housing sector and the economy in general. Not paying the right amount of tax is therefore a criminal offence, however when the HMRC first announced that they were cracking down on landlords they said they would not fine or start legal proceedings against those that had made an honest mistake. Unfortunately, even though a large percentage of landlords that failed to pay the right amount of tax did so by accident, there are those that purposely try to cheat the system. Soon, the HMRC will crack down on such landlords in order to ensure that they are paying the right amount of tax.
Landlords and Self-Assessments
As a landlord, you are required to pay tax on all the income you make from rent payments, however unlike those that are under the PAYE system (Pay As You Earn) you will have to calculate the amount of tax you owe yourself and make regular payments. This is done via self-assessments which need to be completed once a year and sent via post to the HMRC by the 31st of October or submitted online by the 31st of January. Before getting a self-assessment tax return however, you need to register with the HMRC who will then provide you a Unique Taxpayer Reference which is a ten digit number you will require when filling in your self-assessments. Once registered with the HMRC for self-assessment, they will send you a letter once a year between April and May to remind you that it is time to fill in your self-assessment form.
Learning about Self-Assessments
Unless you have done them multiple times before or you have some accounting knowledge, completing a self-assessment tax return can be quite daunting. This is because you need to accurately record your income for the past year and then add deductibles such as letting agent fees and landlord insurance policies. Many landlords are unsure exactly what information they need to provide and what monies they receive is eligible for income tax or National Insurance (NI), which is why these new tutorials created by the HMRC will be extremely beneficial. Even though the online tutorials are supposed to quickly and easily teach landlords how to correctly fill in their self-assessment tax returns, a spokesperson for the body reminded landlords that if they are ever unsure about how to fill in their self-assessments they should get in touch with the HMRC immediately.
Failing to Pay Tax
As previously mentioned, if you fail to pay the right amount of tax the HMRC are able to fine you a substantial amount of money and you could even face criminal prosecution. If you believe that you have failed to declare your income correctly on your last tax return and therefore paid too little tax, now is the time to get in touch with the HMRC and set the record straight. The HMRC are currently giving landlords a grace period when it comes to admitting that they paid too little tax, however this is not going to last long. In fact, the HMRC are planning to be harsher towards landlords that fail to pay the right amount of tax in the future, and with their new online tutorials landlords will no longer be able to claim that they were confused or didn’t know how to fill in their self-assessments properly.
Staying on the right side of the HMRC is essential for any landlord, as it means that you won’t be putting your business in danger. Remember, if you are ever unsure what tax you owe you should get in touch with the HMRC straight away or hire an accountant to fill in your tax returns for you.
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