The charge is based on a notional market rent for the property.
Example 4 Assuming a rental yield of, say, 5%, the income tax charge for a higher rate taxpayer on a £1 million property will be £20,000 each year.
The rental yield or value is established assuming a tenant’s repairing lease.
Properties need to be valued once every five years. In situations where events happened prior to 6 April 2005, the first year of charge is 2005/06 and the first valuation date is 6 April 2005 with the next valuation due on 6 April 2010.
The charge is reduced by any actual rent paid by the occupier – so that there is no charge where a full market rent is paid.
he charge will not apply where the deemed income in relation to all property affected by the rules does not exceed £5,000.
The rules are more complex where part interests in properties are involved.