Couple of Tax / Tax Return Queries

chels

Firstly, apologies for the the long post! Hopefully someone will be able to help with a couple of queries regarding tax / tax returns.

I’m completing a Self Assessment Tax Return for the first time, previous years were completed by an Accountant my Dad had used for many years but since losing my Dad it made sense to me to complete returns myself rather than faffing around sending paperwork back and forth to the Accountant and I guessed my return would be pretty straightforward. In addition, he doesn’t always seem to be on the ball with everything which has partially lead to the queries I have now. I was expecting to basically follow what the Accountant had done on previous return(s) but it’s brought up a query on part of the return I hadn’t taken much notice of previously.

On the property income form SA105, I’ve assumed the figure to put into Box 20 (Total rents and other income from property) is the gross rental income, I.e prior to management fees or any other costs being deducted? The reason I’m a little unsure is, looking at last year’s tax return (2018/19) completed by the Accountant, I can’t tally up the figure in this box with the income received from the property rented out, not helped by the income originally being shared with my Dad but after losing him in September 2018, no tax return was completed for my Dad for 2018/19 as the HMRC said they didn’t require one. So if the gross monthly rental income is e.g. £1,000.00 I would put £12,000.00 in Box 20? Or am I missing something that the Accountant could have legitimately deducted or added to the figure?

My other query is about allowances on savings interest. Apart from a couple of small dividends per year totalling approx £100.00 and savings interest, my only income is from the rental property. While on the phone to the Accountant discussing completing my own tax returns going forward he referred to the £1,000.00 I can earn in savings interest tax free, I mentioned about other allowances that could increase the amount of savings interest I can receive without being taxed to which he referred to something that allows another £2,000.00 I think he said at which point I decided not to pursue the conversation on this any further as it didn’t relate to anything I’d read previously and quite honestly I didn’t really trust what he was saying!

So, for ease of calculations, let’s say my gross rental income is £12,000.00 with £0.00 costs, going by the information on gov.uk am I right in thinking I could earn up to £6,500.00 in savings interest before any tax on savings kicks in? Based on:

Personal Allowance £12,500.00

Starting Rate for Savings £ 5,000.00

Personal Savings Allowance £ 1,000.00

Less Rental Income £12,000.00-

Remaining Allowance before tax £ 6,500.00

Thanks in advance for any guidance on the above.

jimmo

Property

Strictly speaking you are correct that the figure to put in box 20 is the gross rental income but, in my days as a taxman it was not unusual for people to enter an amount net of letting agents fees (perhaps the gross amount received from the lettings agent). No harm done as long as the lettings agents fees are not double claimed.

You should only declare your share of the gross income so if the gross lettings income for for 2018/19 was £1000 per month I would expect you to declare approx ( 6*500 + 6*1000) £9,000.

 

Savings

The £2000 your ex-accountant was talking about was probably the "dividend allowance"

 Tax on dividends - GOV.UK (www.gov.uk)

Dazed_and_C0nfused

So, for ease of calculations, let’s say my gross rental income is £12,000.00 with £0.00 costs, going by the information on gov.uk am I right in thinking I could earn up to £6,500.00 in savings interest before any tax on savings kicks in?

Correct unless you have applied for Marriage Allowance in which case the Personal Allowance becomes £11,250 (with some tax due on the rental income) and the £6,500 becomes £5,250.

£4,250 savings starter rate and £1,000 savings nil rate (aka Personal Savings Allowance).

If you genuinely have a low level of expenses then don't forget about the £1,000 property allowance (an alternative to claiming expenses).

chels

jimmo said:

Property

Strictly speaking you are correct that the figure to put in box 20 is the gross rental income but, in my days as a taxman it was not unusual for people to enter an amount net of letting agents fees (perhaps the gross amount received from the lettings agent). No harm done as long as the lettings agents fees are not double claimed.

You should only declare your share of the gross income so if the gross lettings income for for 2018/19 was £1000 per month I would expect you to declare approx ( 6*500 + 6*1000) £9,000.

 

Savings

The £2000 your ex-accountant was talking about was probably the "dividend allowance"

 Tax on dividends - GOV.UK (www.gov.uk)

The Accountant has always entered separate figures for the various expenses and I took into account that part of the year (2018/19) I would have received half and the remaining part the whole amount of rent but I just cannot fathom the figure in Box 20 for that year's tax return.  If there was a tax return completed for my Dad as well maybe I could've made sense of it but my feeling is the Accountant has just made a mistake. 

Oh well, I won't dwell too much on previous tax returns, there's nothing that's wildly out but the main thing is I have the correct procedure set right in my head going forward so thanks for the clarification.  

It's possible he was referring to the dividend allowance but it doesn't really fit with how the conversation went plus it also means he missed confirming the additional amount of allowance(s) relevant in my case, seems strange but never mind I'm sorted now!  

chels

Dazed_and_C0nfused said:

So, for ease of calculations, let’s say my gross rental income is £12,000.00 with £0.00 costs, going by the information on gov.uk am I right in thinking I could earn up to £6,500.00 in savings interest before any tax on savings kicks in?

Correct unless you have applied for Marriage Allowance in which case the Personal Allowance becomes £11,250 (with some tax due on the rental income) and the £6,500 becomes £5,250.

£4,250 savings starter rate and £1,000 savings nil rate (aka Personal Savings Allowance).

If you genuinely have a low level of expenses then don't forget about the £1,000 property allowance (an alternative to claiming expenses).

No Marriage Allowance involved so in my example £6,500 it is!  I'm a way off reaching the remaining allowance available to me in savings interest but it's good to have confirmation of how I believed the allowances work.  It's possible I might work again part time so there's potential that the remaining allowance amount becomes more relevant. 

The total property expenses would, in a 'standard' year, be below £1,000 but not majorly under, this year will be over due to a repair required that will take it over.  Either way, I'll have no tax to pay but it's something I'll bear in mind.

Thanks for the information.