Landlord income

[Moosehoosenew]

Hi,

My son owns a flat which he briefly used for university. It is now let and income to April 2023 will be in the region of £5k. He will have additional part time job income that year of a few hundred.

His total income therefore well below the personal tax threshold.

Does he need to register for (by Thursday) a tax return, hoping not. He lives in Scotland.

Many thanks if anyone knows.

[silentknight]

I don't have any experience but the HMRC page says anything over £2500 (after allowable expenses) needs a tax return.

(I'm not able to post the link but it's the first link from a search for "gov uk Renting property paying tax".)

[Loup321]

Don't be afraid of tax returns. When I first considered doing something that required a tax return, I was similarly adverse to doing one. When I actually came round to needing to do one (also for renting out property), it was very straightforward to keep everything organized. I am an organized person, but anyone who isn't really ought to be for personal finance, so it's a good habit to get. This year, I didn't need to complete a return, but did one anyway. I found out that my tax code was very slightly wrong (I think they paid me back about £40), and it would have stayed wrong for years because the personal allowances are frozen and tax codes are not routinely being reviewed annually by HMRC as they used to be. It's correct now, so an hour well spent, in my view!

[Lootman]

Don't be afraid of tax returns. When I first considered doing something that required a tax return, I was similarly adverse to doing one. When I actually came round to needing to do one (also for renting out property), it was very straightforward to keep everything organized. I am an organized person, but anyone who isn't really ought to be for personal finance, so it's a good habit to get. This year, I didn't need to complete a return, but did one anyway. I found out that my tax code was very slightly wrong (I think they paid me back about £40), and it would have stayed wrong for years because the personal allowances are frozen and tax codes are not routinely being reviewed annually by HMRC as they used to be. It's correct now, so an hour well spent, in my view!

I agree, doing a tax return is good discipline and helps you understand the rules and so in turn how to minimise future exposure. In the US every taxpayer has to do a self-assessment return and nobody thinks much about it.

[Charlottesquare]

Don't be afraid of tax returns. When I first considered doing something that required a tax return, I was similarly adverse to doing one. When I actually came round to needing to do one (also for renting out property), it was very straightforward to keep everything organized. I am an organized person, but anyone who isn't really ought to be for personal finance, so it's a good habit to get. This year, I didn't need to complete a return, but did one anyway. I found out that my tax code was very slightly wrong (I think they paid me back about £40), and it would have stayed wrong for years because the personal allowances are frozen and tax codes are not routinely being reviewed annually by HMRC as they used to be. It's correct now, so an hour well spent, in my view!

I agree, doing a tax return is good discipline and helps you understand the rules and so in turn how to minimise future exposure. In the US every taxpayer has to do a self-assessment return and nobody thinks much about it.

I thought in the US there were different options/paths/claims a US tax payer could take re certain items, but must admit I did not look very closely but instead gave my son the name of a UK/USA firm to assist him with his mid tax year transition to the States.

[Lootman]

I agree, doing a tax return is good discipline and helps you understand the rules and so in turn how to minimise future exposure. In the US every taxpayer has to do a self-assessment return and nobody thinks much about it.

I thought in the US there were different options/paths/claims a US tax payer could take re certain items, but must admit I did not look very closely but instead gave my son the name of a UK/USA firm to assist him with his mid tax year transition to the States.

I believe that every US individual or couple has to submit a self-assessment tax return annually. But the form you fill in depends on the complexity of your return.

So for instance there is a 1040EZ (geddit?) for those just on employment income where there is withholding (like our PAYE except that you set the withholding yourself).

Then there is a 1040A for moderate returns.

And then the full blown 1040 for many, with of course any number of attached forms.

If your son is a US non-resident then the form is 1040NR. There may be others.

Plus State returns of course.

[Charlottesquare]

I thought in the US there were different options/paths/claims a US tax payer could take re certain items, but must admit I did not look very closely but instead gave my son the name of a UK/USA firm to assist him with his mid tax year transition to the States.

I believe that every US individual or couple has to submit a self-assessment tax return annually. But the form you fill in depends on the complexity of your return.

So for instance there is a 1040EZ (geddit?) for those just on employment income where there is withholding (like our PAYE except that you set the withholding yourself).

Then there is a 1040A for moderate returns.

And then the full blown 1040 for many, with of course any number of attached forms.

If your son is a US non-resident then the form is 1040NR. There may be others.

Plus State returns of course.

I though one of the options was whether you filed as an individual or a couple (His wife is American) so you had to work out if this was a good idea, or maybe that was just year of arrival (moving to USA)

Whilst they have been married a few years (2020 I think) he only got his work permit and moved there last year.

It may be unfamiliarity makes things scarier but it struck me , when chatting with him, that USA returns were a lot more complex than UK ones re balancing choices one can make.

[Lootman]

I believe that every US individual or couple has to submit a self-assessment tax return annually. But the form you fill in depends on the complexity of your return.

So for instance there is a 1040EZ (geddit?) for those just on employment income where there is withholding (like our PAYE except that you set the withholding yourself).

Then there is a 1040A for moderate returns.

And then the full blown 1040 for many, with of course any number of attached forms.

If your son is a US non-resident then the form is 1040NR. There may be others.

Plus State returns of course.

I though one of the options was whether you filed as an individual or a couple (His wife is American) so you had to work out if this was a good idea, or maybe that was just year of arrival (moving to USA)

Whilst they have been married a few years (2020 I think) he only got his work permit and moved there last year.

It may be unfamiliarity makes things scarier but it struck me , when chatting with him, that USA returns were a lot more complex than UK ones re balancing choices one can make.

Unlike the UK if you are married then you must file as a married person and not as a single person or "head of household". However if married there is an option of filing either a joint return or filing as "married filing separately". Which you do is a question of running the numbers both ways. Most married people are better off filing as a couple, but there are exceptions.

If a US person has a foreign spouse who is non-resident and who has no US source income, then I believe that the alien spouse can be omitted from the return.

And yes, tax returns can be formidably complex, but should not be for someone just with employment income, shares and property. And the tax breaks are better e.g. being able to deduct mortgage interest and property tax from your gross income for tax purposes. Self-employment and partnerships introduce considerable more complexity.

[Charlottesquare]

I though one of the options was whether you filed as an individual or a couple (His wife is American) so you had to work out if this was a good idea, or maybe that was just year of arrival (moving to USA)

Whilst they have been married a few years (2020 I think) he only got his work permit and moved there last year.

It may be unfamiliarity makes things scarier but it struck me , when chatting with him, that USA returns were a lot more complex than UK ones re balancing choices one can make.

Unlike the UK if you are married then you must file as a married person and not as a single person or "head of household". However if married there is an option of filing either a joint return or filing as "married filing separately". Which you do is a question of running the numbers both ways. Most married people are better off filing as a couple, but there are exceptions.

If a US person has a foreign spouse who is non-resident and who has no US source income, then I believe that the alien spouse can be omitted from the return.

And yes, tax returns can be formidably complex, but should not be for someone just with employment income, shares and property. And the tax breaks are better e.g. being able to deduct mortgage interest and property tax from your gross income for tax purposes. Self-employment and partnerships introduce considerable more complexity.

We used to have election for separate taxation of H & W in the UK back in the mid 80s, in fact one of the questions in my final Uni exams had a question where I had to calculate whether worthwhile being taxed on the default joint basis or whether separate taxation was worthwhile that year. (Luckily for me I had revised it/worked through a past paper example the night before)

[Moosehoosenew]

Many thanks for answers

Yes it seems if over £2500 income from letting you must register for a return.

Interestingly (well to me anyway) with savings interest rates rising I think the HMRC website says you do not have to register for a return unless your savings interest is greater than £10k. I am not sure how this applies to some with that savings income and a pension and someone with the 10k savings income but no other income(eg retired but not receiving a pension yet)


On the topic US tax return we have a daughter who works in USA and yes had to a tax return from the get go even though in a salaried position. I believe there were some benefits as some allowable expenses that would not be allowed in the UK to salaried employees.