Tax Rules on Static Caravan Rental

My husband and I have (purchased in Aug 2019 on 10yr finance) a pre owned static caravan on a holiday park on the south coast which we purchased when we lived 300 miles away in the north east so we could travel down to see our family and take our grandchildren for little holidays and to make memories. We had hoped by letting it out when not using it ourselves any income would help cover the cost of site fees (£6 - 7k annually since 2020), utility costs and maintenance/insurance etc by, however, due to Covid lockdown we were hardly able to let it out in 2020 (still had full site fees paid on credit card) and and so far we have never made enough to cover the site fees and other costs let alone finance payments of £6k per year. We have had to top up what income we made on a credit card and so we have decided at the end of this season we are giving it up even though we will still owe a substantial amount (?£25K) on finance which will be at the halfway point where we can surrender it back to finance company and walk away with nothing more to pay. Its been very stressful and complicated and I've only recently learned that we should have been completing declarations for tax so not sure where we stand as we have already lost thousands of pounds paying out more than we get back by renting it out Any advice? Our only income is my husbands state pension (he is 71) and attendance allowance while I (64 this year) have a small NHS pension (early ill health retirement) and due to disability I receive contribution based ESA and PIP.

Hi ,
 

Thank you for your question. I would advise you that any income that you receive from renting out your static caravan will be treated as taxable income from property income. However, you are also entitled to claim any allowable property expenses to set off against the rental income that you have received. This could include site fees but the site fees you have paid would need to be apportioned so that you only claim the expenses relating to the actual periods of time the caravan was rented out. If your total allowable expenses are more than the actual rental income that you received then you would effectively have made a loss which could then be carried forward to a later tax year. Please refer to the following links for more information : https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income and https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income. I would also advise you that HMRC would need to know your individual overall circumstances to enable us to give you the correct advise as to whether or not you would actually have a tax liability. I have therefore included the following link to enable you to contact HMRC for further guidance :  https://www.gov.uk/government/organisations/hm-revenue-customs/contact/self-assessment  . Thank you .