rental income tax confusion

jt2007

sorry if this is a tired thread. I have done my research but often find conflicting information. im about to fill in my forst SA for rental income. I know I can use all my expenses comprising repairs and fees such as remortgage fees, service charge fees as well as 10% wear and tear allowance. but have questions/advice to ask on two points

1. I am also told I can claim using my home as an office at a cost of £208 a year. I can find this mentioned on old hmrc links but not the most recent onen has it therefore been abolished?!

2. rent received is £600 a month. mortgage is £300 (interest only) and service charge £100 a month. so over the year ive made £2400 but bought furniture out of this. my wife is on maternity and money is tight therefore would appreciate any advice to reduce my tax bill. the 10% allowance and some expenses reduces the profit to £1400 but I'm in the 40% tax bracket so stand to lose £600 making it a very disappointing low income for us. id be a lot happier not losing that £600! is there anything im missing in expnses claimed which would help me if people don't mind sharing their tips. if not, no problem I just thought I would check first!!
any help appreciated
thanks
jt

Savvy_Sue

Who owns the rented property? You alone, or you and your wife? If it's you alone, you're missing a trick because she's not, presumably, a 40% tax payer.

I cannot comment on the expenses question. You might do well to consult an accountant, at least in the first year, I'd phone two or three and ask for quotes.

jt2007

we jointly own it. so actually half the profit will be at the 20% rate

gkerr4

jt2007 wrote: »

we jointly own it. so actually half the profit will be at the 20% rate

that will be on HER tax return then - you can't do it yourself on your return - assume you know this.

split everything 50/50 - income, costs etc and that gives you 'your' part and your wife will declare the other.

Home office (in your own home) is a difficult part - the phrase "wholly and exclusively" comes up a lot - is the area in your house used solely for the administration of your rental property? if yes then claim it - if not, then be careful also as it could be argued that a certain % of your domestic residence should have business rates applied - and of course some of your house proceeds on sale eligible for CGT as it was a part-business property.

jt2007

thanks gkerr I will leave the home as an office claim off. I had to replace lots of shelves and lampshades. does this constitute repair and so can I claim these? the rest of my claims are paint and bank fees which are allowable but im confused as to whether shelves etc constitute a repair or part of my 10% furnishing claim

Savvy_Sue

jt2007 wrote: »

thanks gkerr I will leave the home as an office claim off. I had to replace lots of shelves and lampshades. does this constitute repair and so can I claim these? the rest of my claims are paint and bank fees which are allowable but im confused as to whether shelves etc constitute a repair or part of my 10% furnishing claim

That is where talking to an accountant pays dividends (or at least saves tax). I'm not one, and I'm not a landlord, but one who understands the rules about what is and is not allowable, and which category it falls under, should ensure you get it right. Some things are arguable, I believe, and having one explain what the various arguments are could be very helpful, even if in future years you DIY the accounts. Also should HMRC disagree with your expenses claim ('that's not a repair that's a furnishing', for example), you'll have a professional to back you up rather than a 'someone on t'internet said ...'

Brighty

Buildings insurance, boiler service, boiler landlord safety check/cert (assuming there's gas), they're all things you should have, so should have paid for, so they're expenses. Do you have a letting agent? their fees are an expense.


Brighty

jt2007

yes gas checks etc ive included. I've found my own tennants so no agency fees. bit annoying I may as well have saved my time and used an agency really

lovinituk

jt2007 wrote: »

yes gas checks etc ive included. I've found my own tennants so no agency fees. bit annoying I may as well have saved my time and used an agency really

Well not necessarily. If you paid them £500 for example, you don't save £500 in tax. You save 20%, or in your case 40%, on the cost of the expense. So you would have saved £200 in tax in this example but it still would have cost you £300 in the end.

CLAPTON

jt2007 wrote: »

yes gas checks etc ive included. I've found my own tennants so no agency fees. bit annoying I may as well have saved my time and used an agency really

why is that?

jt2007

because paying an agency would have saved me time and I could have paid less tax so the overall agency cost wouldn't be as much as I thought. but as lovein said I still would have paid a few hundred ao yes I actualky am glad I did it myself. just with a newborn and full time work sometimes im regretful of when I dont save time but iverall im glad for saving money