How to Account for One-Off Buying/Survey/Mortgage Costs in Tax Returns

JosephBrown

Hi everyone,

So I'm self employed and I've always done my tax returns myself and I'm planning on continuing to do this with my first upcoming Buy to Let too if I can. 

However, how do I account for things involved in the buying process like the legal fees, survey costs and mortgage arrangement fees which aren't annual or normal running or maintenance costs to be expected year to year.

Do these costs still come off of the first years rent (reducing income tax)? Or do they get added up and saved for later when selling the property to reduce the liability for capital gains tax (even though there will likely be none-to pay if it doesn't grow any quicker year on year than the CGT allowance anyway)? Or are these dealt with in another way?

 

Also, if they come off of the rent, so total rent in the year MINUS the annual operating expenses, MINUS the setup expenses, what about those like the survey that I paid for in the tax year 2019-2020. Do these get withheld until the sale goes through and I start earning rent in 2020, or do I account for them in my self-assessment in the 2019-2020 tax return, in essence meaning my Buy to Let would of made a loss in 2019-2020, which would then come off of the income I made from my other self-employed work?

Just not sure what to do with these expenses, any advice from someone in the know would be fantastic!

Cheers,

Joe

oldbikebloke

so your self employment knowledge counts for nothing when looking at property rules 

done any reading?
https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income
done any courses?
http://www.hmrc.gov.uk/courses/syob3/new_letting/HTML/new_letting_menu.html
read the bible so you know the difference between a capital cost and a revenue cost?
https://www.gov.uk/hmrc-internal-manuals/property-income-manual
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2020
and the other bible?
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46900

know how to treat loan interest?
https://www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies

read up on one offs?
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2105
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2030

know how to switch between accruals and cash basis?
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1095

csgohan4

OP you need an accountant as clearly your out of your depth. One can only do so much on a forum of strangers who give free advice.

I Have an accountant for these matters,because you do not want to get these wrong and get punished by the HMRC severely, ignorance is not an excuse

Good luck

JosephBrown

csgohan4 said:

OP you need an accountant as clearly your out of your depth. One can only do so much on a forum of strangers who give free advice.

I Have an accountant for these matters,because you do not want to get these wrong and get punished by the HMRC severely, ignorance is not an excuse

Good luck

Silly question but how do I go about getting a decent one?? I called a firm last week, had someone call me back and talk a load of rubbish to me for an hour, half of which I had to correct (such as him saying the self-employed paid 6% National Insurance when it's actually 9%) before he told me that for them to do what I do myself already would cost £400, and the new property stuff would add an extra fee on top of that.

I'd happily pay an accountant if I felt they took the time to fully understand my situation, my goals in the next few years and they advised me/set things up for me in the best way to achieve them. But most just seem to want to fill in your tax return and charge you hundreds for doing so, no understanding or advice given

uknick

JosephBrown said:

csgohan4 said:

OP you need an accountant as clearly your out of your depth. One can only do so much on a forum of strangers who give free advice.

I Have an accountant for these matters,because you do not want to get these wrong and get punished by the HMRC severely, ignorance is not an excuse

Good luck

Silly question but how do I go about getting a decent one?? I called a firm last week, had someone call me back and talk a load of rubbish to me for an hour, half of which I had to correct (such as him saying the self-employed paid 6% National Insurance when it's actually 9%) before he told me that for them to do what I do myself already would cost £400, and the new property stuff would add an extra fee on top of that.

I'd happily pay an accountant if I felt they took the time to fully understand my situation, my goals in the next few years and they advised me/set things up for me in the best way to achieve them. But most just seem to want to fill in your tax return and charge you hundreds for doing so, no understanding or advice given

I don't think you spoke to an accountant; rather a blithering idiot.  Out of interest, was it a local practice or one of those internet stack 'em high, sell 'em cheap companies? 

JosephBrown

uknick said:

I don't think you spoke to an accountant; rather a blithering idiot.  Out of interest, was it a local practice or one of those internet stack 'em high, sell 'em cheap companies? 

I suppose I'd agree! It was the local branch of a large, national company with offices in most of the major cities. Not an online one and not a small local practice either, but a branch of one of the larger 'chains' if you like. Would a local small practice be better as they have less overheads and therefore spend more time with each client? Or would a small practice be less likely to have knowledge of dealing with property and self-employed incomes/expenses together?

Pennywise

JosephBrown said:
Or would a small practice be less likely to have knowledge of dealing with property and self-employed incomes/expenses together?

A small/local QUALIFIED/REGULATED accountant will probably be doing that in their sleep - it's bread and butter work for most local/small accountants.  The big online factories and big national firms are often too specialised or accustomed to big/rich people.  A small/local firm will usually consist of lots of small/local clients - i.e. people like you!

kuratowski

Yes, to reiterate part of what @Pennywise says, do make sure they are registered with one of the certifying bodies (i.e. ICAEW, ICAS, ACCA).

JosephBrown

Pennywise said:

JosephBrown said:
Or would a small practice be less likely to have knowledge of dealing with property and self-employed incomes/expenses together?

A small/local QUALIFIED/REGULATED accountant will probably be doing that in their sleep - it's bread and butter work for most local/small accountants.  The big online factories and big national firms are often too specialised or accustomed to big/rich people.  A small/local firm will usually consist of lots of small/local clients - i.e. people like you!

Ahhh that sounds much better then!! Like I say, I'm happy to use an accountant, intact I want to use one - but I only if it's someone who'll sit down and take the time to understand my situation just as well as I do myself and therefore advise/do what's best for me, instead just filling in the form I can do myself and charging me hundreds for it.

I'll look into some local registered firms, although I suspect they'll mostly be shut to new clients/meetings now with everything that's going on.

kuratowski said:

Yes, to reiterate part of what @Pennywise says, do make sure they are registered with one of the certifying bodies (i.e. ICAEW, ICAS, ACCA).

Will do! I did do a little AAT when I was younger so I have heard of those bodies before.

uknick

JosephBrown said:

Pennywise said:

JosephBrown said:
Or would a small practice be less likely to have knowledge of dealing with property and self-employed incomes/expenses together?

A small/local QUALIFIED/REGULATED accountant will probably be doing that in their sleep - it's bread and butter work for most local/small accountants.  The big online factories and big national firms are often too specialised or accustomed to big/rich people.  A small/local firm will usually consist of lots of small/local clients - i.e. people like you!

Ahhh that sounds much better then!! Like I say, I'm happy to use an accountant, intact I want to use one - but I only if it's someone who'll sit down and take the time to understand my situation just as well as I do myself and therefore advise/do what's best for me, instead just filling in the form I can do myself and charging me hundreds for it.

I'll look into some local registered firms, although I suspect they'll mostly be shut to new clients/meetings now with everything that's going on.

kuratowski said:

Yes, to reiterate part of what @Pennywise says, do make sure they are registered with one of the certifying bodies (i.e. ICAEW, ICAS, ACCA).

Will do! I did do a little AAT when I was younger so I have heard of those bodies before.

To be honest, instead of signing up for an accountant's services, initially you might be better off paying for a couple of hours sit down time with them (say a couple of hundred £) to go through your basic needs and questions.  As said above, a lot of what you need can be found via the internet with the right guidance.

If you then think you still need professional help, you can commit.  If you do sign up, as part of their service they might review your sole trader accounts to see if there is any scope for saving you tax or increasing your business's efficiency.