2nd house renting first

[valley]

Hi,
I have just recently bought a 2nd house with a friend which I am living in. The first house I bought as an owner occupier, so I could use the rent a room scheme. Since I bought my first house 3 years ago now in october I have rented it out. and the bills are in other people names. I have not declared that I am renting out this house.But I thought that I should now as I have bought the new one. what are my options and how much would I have to pay, at the moment if it was alot of money it would hit me really hard and I don't think I could afford it. I really don't want to lose the house as it is a long term investment. the letting agent was basically renting the first out for cash, but he has advised me to change that recently, I don't think he wants to do that anymore.But maybe I could say I was living in the house and renting one of the rooms out to another person or couple as there names would be on the bills. and then when my new house was ready 3 months ago I could say I rented it out fully and moved into my new house? any advice would be really apprecaited

thank you.

 

[ClubMan]

I have not declared that I am renting out this house.But I thought that I should now as I have bought the new one. what are my options and how much would I have to pay

You need to work out what rental income tax is outstanding since you started renting without declaring. You also need to repay any owner occupier mortgage interest tax relief claimed fraudulently. You need to register with the PRTB. Without doing this you cannot offset mortgage interest against rental income when doing your return. You should get professional tax advice if necessary. You might want to consider switching to interest only on the investment property too. See the Property Investment key posts.

at the moment if it was alot of money it would hit me really hard and I don't think I could afford it. I really don't want to lose the house as it is a long term investment.

Well you have a legal (and some would say moral) obligation to be tax compliant. If you can't do this and make the investment viable then something's gotta give.

the letting agent was basically renting the first out for cash

You mean tax evasion?

But maybe I could say I was living in the house and renting one of the rooms out to another person or couple as there names would be on the bills.

If you are not living there then to claim to be would be further perpetuating this fraud and tax evasion.