Cash clinic: Rental headache as tax deadline looms

Q I GOT married last year, moved into my wife's flat and started renting mine out. I now need to pay tax on that rental income, but I have been grappling with HM Revenue & Customs (HMRC) for some time now and I am aware that the tax returns deadline is looming.

Could you advise as to what I need to do to meet HMRC's requirements?

For the sake of my sanity, I'm thinking of getting an accountant or financial adviser on the case. Would this be a good idea? CR, Perth

A YOU are quite correct that any rental income from your flat arising in the tax year that ended on 5 April, 2009, needs to be declared, along with details of all your other taxable income and allowable expenses for the year.

Self-assessment tax returns can be completed online by an individual using HMRC's own software, and the deadline for the submission of tax returns for the year ended 5 April, 2009, is 31 January.

Any additional tax that arises for the year also has to be paid by that date. However, you do need to have been issued with a ten-digit unique taxpayer's reference (UTR) before you can use the online submission system.

You have mentioned that you have been having some problems in your dealings with HMRC and, certainly, the self-assessment system can be a minefield for the lay person. As such it may be that the best way forward is to hand the compliance work to a professional, such as an accountant or lawyer.

The costs of such compliance work will vary on the firm that you choose to employ and the level of service that is supplied.

Some tax shops on the high street will complete the work for a flat fee, and will merely process the information that is supplied to them.

Others firms will charge based on the time spent on completing your return, but will also give advice on the best way to arrange your income tax affairs to ensure that you claim all appropriate reliefs and allowances to reduce your annual tax bill by as much as possible.

As the deadline is nearing, an accountant/lawyer would also be able to prepare an informed estimate of the tax due and advise on an appropriate payment on account to the Collector of Taxes so that no penalties or interest charges will accrue should you not make the 31 January deadline.

Dependant on the types of income that you are declaring in your self-assessment return a proportion of the fees incurred may be available to be offset for tax purposes.

• Glen Gilson is a partner and head of private client and financial services at HBJ Gateley Wareing

• If you have a question you need answered, write to Jeff Salway, Personal Finance Editor, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail: [email protected].

This above is for general purposes only and is not tailored for individual use. It does not constitute legal, financial or investment advice on any particular matter and must not be treated as a substitute for specific advice. No action should be taken in reliance of the information given. The Scotsman Publications Ltd and HBJ Gateley Wareing accept no liability on the basis of this article.