Where Taxpayers and Advisers Meet

Tax on unearned income ?

mingi
Posts: 1
Joined: Wed Aug 06, 2008 3:26 pm

Postby mingi » Mon Jul 04, 2005 2:09 pm

Hello

I'm part owner of a house which was left to us in a will 11 years ago, during this time it has vacant.

We have just started procedings to rent the property out (£600pm) (valued @ £160,000).

I have been told as it's unearned income tax will be 40%, does anyone know if this is correct?

Thanks

nikki_
Posts: 1
Joined: Wed Aug 06, 2008 3:26 pm

Postby nikki_ » Mon Jul 04, 2005 3:38 pm

Hi
I have recently been investigating this issue and beleive it is the rental income (less management fees) less repairs and insurance that will be the taxable amount. This will be 40% if you are a higher tax payer.

MikeR371
Posts: 23
Joined: Wed Aug 06, 2008 3:26 pm

Postby MikeR371 » Tue Jul 05, 2005 2:49 am

Doesn't sound right to me either. I think it's just treated as any other income would be, taxed at your usual rate. Not sure if there are separate taxes anymore on 'unearned' income.

deanshepherd
Posts: 1019
Joined: Wed Aug 06, 2008 3:23 pm

Postby deanshepherd » Tue Jul 05, 2005 3:03 am

Unearned income is taxed at your marginal rate of either 10, 20 or 40%. (As oppose to 10, 22 and 40 for earned income and 10 and 32.5 for dividend income).

To be paying tax at 40% you must have taxable income (after allowances) in excess of £32,400.

Taxable rental income is indeed after any allowanbe expenses such as loan interest, repairs, insurance, management fees etc.

Dean Shepherd
dean@mmi-online.co.uk
www.mmi-online.co.uk
MMI, The Surrey Accountants

King_Maker
Posts: 6411
Joined: Wed Aug 06, 2008 3:22 pm

Postby King_Maker » Tue Jul 05, 2005 3:10 am

The rental *profits* will be added to the rest of your income for the tax year and tax at your marginal rate(s).

The Inland Revenue's booklet IR150 on the Taxation of Rental Income has been withdrawn. There is some information on Lettings in IR87, and in the Property Income Manual.

IR87 is downloadable from their website.

http://www.hmrc.gov.uk/leaflets/menu.htm

King_Maker
Posts: 6411
Joined: Wed Aug 06, 2008 3:22 pm

Postby King_Maker » Wed Jul 06, 2005 5:04 am

"Unearned income is taxed at your marginal rate of either 10, 20 or 40%."

I would disagree, Dean.

Property income (under the old Schedule A legislation, now Part 3 of ITTOIA 2005), excluding FHL (Furnished Holiday Lettings) is unearned income with tax rates of 10%, 22% and 40%.

deanshepherd
Posts: 1019
Joined: Wed Aug 06, 2008 3:23 pm

Postby deanshepherd » Wed Jul 06, 2005 6:06 am

Yes, you are right. My mistake.

MOLL
Posts: 1
Joined: Wed Aug 06, 2008 4:01 pm

Postby MOLL » Fri Nov 09, 2007 2:00 am

i am thinkinkg of letting a flat out. How soon must i inform the inland revenue of my plans.


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