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Letting Property Refresher - 

8/1/2016

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Picture
Photo by Tierra Mallorca on Unsplash
I’ve been working on a large number of tax returns that do include income from property and the conversation has drifted to the new rules which are being phased in over the next few years.   I have featured a similar article previously but felt it was appropriate to refresh some of the points.
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As a reminder its really important to complete a tax return and declare the income if you let property.  HMRC have some pretty sophisticated ways to identify let properties and also do monitor Land registry transactions when it comes to sell the property.  In recent years the former Chancellor George Osborne has seemingly made it less attractive to let property with a series of measures aimed at Landlords aimed at rebalancing the housing market.

Lets take a look at the changes:
  • Unfurnished Properties - The renewals basis for things like white goods was abolished 6 April 2013 for unfurnished property leaving landlords with no relief against expenditure on things like fridges and cookers (unless built in) - ironically they could be rented and this would be allowable!  The good news is that this has been reinstated from 6 April 2016.

  • Furnished Properties (remember these properties need to be ready to move into - not just a table and a bed!) - Landlords currently enjoy a 10% wear and tear allowance on rents received which can be very helpful.  2015/16 will be the final tax year when this can be claimed.  Furnished property is being aligned with the replacement basis for unfurnished property with effect from 6 April 2016.

  • All properties - at present full tax relief is available for interest on a loan used to fund a property or improvements.  This is charged as an expense and the ‘profit’ is then incorporated into your tax calculation.   The relief is being reduced with effect from 6 April 2017, so the current tax year is the last tax year for gaining full relief on mortgage interest payments for higher / additional rate tax payers.  Sadly this is where the simplicity ends.  Because interest will no longer be a ‘deduction’ (it will be a tax adjustment instead) the income (pre interest) is shown as a ‘profit’ in your tax calculation – this determines things like tax credits, child benefit, higher rate tax thresholds etc.  The reduced interest relief is then deducted from your tax bill.  This could be quite a nasty trap for people with properties that are breaking even in the £40,000 to £50,000 band with unplanned tax consequences.
Obviously this may still leave some of you with questions or you might just need some additional information. Here at Nigel Gosrki Consulting, I'm used to taking these calls and advising my clients on the best course of action for them. Please feel at ease to contact me for an informal chat.
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The Sharing Economy

5/27/2016

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PicturePhoto by Markus Winkler on Unsplash

From April 2017, there will be 2 new allowances – one for selling goods or providing services and the other for income from property you own.  Both are £1,000 and you can claim both of them.  

It’s important these are not in any way classed as trades.  Here are some practical examples:
 
  • Land and property – renting part of your garden or say a spare garage for storage
  • Goods and services – selling goods you have made online on websites such as Ebay
 
Technically until 5 April 2017, this income should be declared.  Don’t forget that this also sits over and above the rent a room relief which is currently £7,500, so its fine to have a lodger too within this scheme!  More details can be found by following this link. 

If you have any questions or need to talk to us about your allowances, please give me a call, or contact us through the website


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Letting Property

3/1/2016

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In recent months more and more clients have bought a second property as an investment and are considering more properties.  As a reminder when you let property it needs to go onto your Self Assessment tax return even if you make a loss, as HMRC are getting pretty skilled at spotting let properties!  This also applies to making sure you complete the Capital Gains Section of your tax return when you come to sell it!

There have been subtle changes in the way let properties are taxed over recent years and more are to come:
  • Unfurnished Properties - The renewals basis for things like white goods was abolished 6 April 2013 for unfurnished property leaving landlords with no relief against expenditure on things like fridges and cookers (unless built in) - ironically they could be rented and this would be allowable!

  • Furnished Properties (remember these properties need to be ready to move into - not just a table and a bed!) - Landlords currently enjoy a 10% wear and tear allowance on rents received. This will be abolished from 6 April 2016 and landlords will only be allowed to claim the actual amount of any items replaced
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  • All properties - at present full tax relief is available for interest on a loan used to fund a property or improvements.  From April 2017, tax relief on property loans (including mortgages on single properties) will be restricted so that by 2020, interest will not be an allowable expense but it will receive tax relief at 20%.  For those people paying 40% with high mortgages some careful planning will be required

  • Rent a room - good news here this rises to £7,500 from April 2016

For more information or to see how this may affect you or your business, contact me for details
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    Nigel Gorski

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