In recent months, we have worked with several clients who needed to correct previous tax returns due to common misunderstandings – particularly when the money comes from overseas or when a rental property hasn’t made a profit. This demonstrates how easily genuine misunderstandings can arise, and why it’s important to review all sources of income carefully when completing a return.
The key rule is simple: If you are UK tax resident, HMRC expects you to declare your worldwide income – not just what you earn in the UK – even if no tax is due.
Foreign income – it doesn’t stop at the UK border
If you are UK tax resident, you normally need to declare:
- Overseas employment or self-employment income
- Rental income from property abroad
- Foreign bank interest or dividends
- Overseas pensions
Even if tax has already been paid in another country, the income must still be reported in the UK. In many cases you can claim foreign tax credit relief, so you are not taxed twice.
“There was no profit, so I don’t need to declare it”
This is the biggest misunderstanding we see with rental properties.
If your rental income is over £1,000, HMRC requires rental income to be reported even if the property made a loss or the rent only covered the mortgage and bills. Declaring a loss can actually help you, as it can often be carried forward to reduce tax in future years.
It’s also important to remember that rental income is more than just the monthly rent. Expenses must follow specific HMRC rules, so the income and costs still need to be shown in full on your return – our team can help you identify what can be claimed and ensure it is reported correctly.
What if income was missed before?
If you now realise something should have been declared in earlier years, it is far better to correct this voluntarily. Coming forward usually results in lower penalties than waiting for HMRC to identify the issue.
We want to help our clients make sure they are providing the right information for their tax returns. If you are unsure whether any income needs to be included, or you would like us to review your position before the deadline, please contact our accounts team on 01227 277667. We’re happy to help you check that the correct information is being reported and make the process as straightforward as possible.
