£500 per month in both cases
Thank you for your prompt reply.First of all, both of you will have to declare your share of property income in your respective tax returns.Your monthly rental income of £500 gives you an annual income of £6,000.Had this figure been up to £4,250 per annum you could have opted for Rent a Room scheme, you need to to tick a box on the tax return and no more information required. Also,no tax would be payable.More information on Rent a Room scheme can be found here - helpsheet hs223. You may find notes on Page UKPN 2 (Box 4) and page UKPN 4 (Box 7) helpfulhttp://www.hmrc.gov.uk/helpsheets/hs223.pdfYou say your mortgage interest on the loan to build the extension would be equal to rental income. In this case, you should file supplementary pages SA105 - Property with your tax return. You can offset the interest on loan covering extension so long as you have rental income.Although there may be no profit from property income, property income should be declared as it is chargeable to income tax.More information on SA105 - Property can be found herehttp://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=OSWvtKIMh2c&formId=3187If you don't file a tax return at present , you should register for self assessment to enable you to file a tax return. You will be issued with a Unique tax reference number and you quote this number on all communications with HMRC.More information on self assessment registration can be found herehttp://www.hmrc.gov.uk/sa/register.htm
I hope this is helpful and answers your question.
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Thank you. Are you in effect saying that if the rent equals the interest re-payments there will be no tax payable?
Sorry. I did rate your service as excellent. It seems f I do it again I will have to pay more. What elseshould I do?