Easiest way to pay tax?
Discussion
My wife and I are semi-retired fifty somethings.
My wife is on a defined benefit local authority pension of just over her tax threshold so she pays a few hundred pounds per year on PAYE. We're quite happy with that.
I have little part time job, gives me an income similar to my wife's and also just pay a few hundred pounds per year on PAYE. We're quite happy with that too. We have simple needs, grow most of our own food, generate most of the energy we use so don't need any more income.
Without trying, we've recently acquired an additional income of an extra £6000 per annum for rental of a little bit of land we own.
As per the thread title, what's the simplest way to pay tax on this extra? We have no wish to avoid or minimise the tax owed, just don't want the bother of keeping receipts, engaging an accountant, plodding through acres of paperwork,etc. Is there a simple way to pay the tax on the extra income?
My wife is on a defined benefit local authority pension of just over her tax threshold so she pays a few hundred pounds per year on PAYE. We're quite happy with that.
I have little part time job, gives me an income similar to my wife's and also just pay a few hundred pounds per year on PAYE. We're quite happy with that too. We have simple needs, grow most of our own food, generate most of the energy we use so don't need any more income.
Without trying, we've recently acquired an additional income of an extra £6000 per annum for rental of a little bit of land we own.
As per the thread title, what's the simplest way to pay tax on this extra? We have no wish to avoid or minimise the tax owed, just don't want the bother of keeping receipts, engaging an accountant, plodding through acres of paperwork,etc. Is there a simple way to pay the tax on the extra income?
Self Assessment is the official way of return rental income. Don't forget you can offset allowable costs against the rental income so a small rental income and expenditure account should be prepared to arrive at taxable rental income.
Also, I assume the rented property is jointly owned so all the rental figures (income and expenditure) needs to be split 50/50 and returned separately by you and your wife.
None of this is particularly difficult to do and you don't have to use an accountant.
Both of you have a legal obligation to notify HMRC that you have a new source of income that needs to be taxed under self assessment - so don't delay.
Also, I assume the rented property is jointly owned so all the rental figures (income and expenditure) needs to be split 50/50 and returned separately by you and your wife.
None of this is particularly difficult to do and you don't have to use an accountant.
Both of you have a legal obligation to notify HMRC that you have a new source of income that needs to be taxed under self assessment - so don't delay.
Johnnytheboy said:
Eric: can you confirm there is also a fixed tax relief (1k?) if you don't claim any rental expenses at all?
From HMRC websiteYou can get up to £1,000 each tax year in tax-free allowances for property or trading income from 6 April 2017. If you have both types of income, you’ll get a £1,000 allowance for each.
If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return. You may be required to complete a tax return for other income.
If your annual gross trading income is £1,000 or less, from one or more trades you may not have to tell HMRC, however there are circumstances when you must register for Self Assessment and declare your income on a tax return.
You must keep records of this income. This is known as ‘full relief’.
Johnnytheboy said:
If you go down the self assessment route you can declare rental income without proving anything.
ThisThe rental income section is very simple, even if you have multiple properties.
Its pretty much a single box for rent/income total, another for repairs, another for mortgage interest etc. Obviously you need to work out the figures, but that doesn't need an accountant or even formal books.
98elise said:
Johnnytheboy said:
If you go down the self assessment route you can declare rental income without proving anything.
ThisThe rental income section is very simple, even if you have multiple properties.
Its pretty much a single box for rent/income total, another for repairs, another for mortgage interest etc. Obviously you need to work out the figures, but that doesn't need an accountant or even formal books.
You are by law required to be ABLE to prove the figures you declare.
Eric Mc said:
98elise said:
Johnnytheboy said:
If you go down the self assessment route you can declare rental income without proving anything.
ThisThe rental income section is very simple, even if you have multiple properties.
Its pretty much a single box for rent/income total, another for repairs, another for mortgage interest etc. Obviously you need to work out the figures, but that doesn't need an accountant or even formal books.
You are by law required to be ABLE to prove the figures you declare.
The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
We manage 4 properties with mortgages, insurance, repairs etc on a simple spreadsheet, and supporting receipts/bills are just filed in an envelope for the corresponding tax year.
98elise said:
I wasn't suggesting the OP made them up!
The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
We manage 4 properties with mortgages, insurance, repairs etc on a simple spreadsheet, and supporting receipts/bills are just filed in an envelope for the corresponding tax year.
The OP mentioned that it was a piece of land being rented, so it's probably simpler than that! There may be no outgoings.The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
We manage 4 properties with mortgages, insurance, repairs etc on a simple spreadsheet, and supporting receipts/bills are just filed in an envelope for the corresponding tax year.
98elise said:
I wasn't suggesting the OP made them up!
The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
They INITIALLY accept totals. They INSIST you must have the detailed figures available if required.The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
Therefore, the underlying detailed work needed to prepare the totals must be carried out, and most importantly, exist as a record for future reference.
That's the law.
Whether you apply accountancy skills or book-keeping knowledge to the work you carry out in preparing those underlying figures is a choice and a risk you can take.
The underlying tax rules on calculating rental profits is not as straightforward as you might think.
Eric Mc said:
98elise said:
I wasn't suggesting the OP made them up!
The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
They INITIALLY accept totals. They INSIST you must have the detailed figures available if required.The point I wanted to make was you don't need accountancy or book keeping skills as HMRC want the totals only.
Therefore, the underlying detailed work needed to prepare the totals must be carried out, and most importantly, exist as a record for future reference.
That's the law.
Whether you apply accountancy skills or book-keeping knowledge to the work you carry out in preparing those underlying figures is a choice and a risk you can take.
The underlying tax rules on calculating rental profits is not as straightforward as you might think.
Desiderata said:
I'm not an expert, hence the question in the first place, but I don't think it gets much simpler in terms of records. We own an area of land outright, an entity rents a small part of that land from us entirely. We get a single annual payment of £6000 (index linked) direct to our joint account. The tenant is responsible for maintenance of the land and access, all insurance etc so we have no expenses or liabilities. Not many records to keep.
Whatever they are, you must keep them - that is all.Johnnytheboy said:
I've got an equally complex rent arrangement.
I just keep a spreadsheet of payments made in case anyone ever wants to see records.
And claim the 1k tax relief
A spreadsheet isn't enough. It's the underlying records (especially third party documents - such as bank statements and supplier invoices for services and materials ) that are what HMRC is REALLY talking about.I just keep a spreadsheet of payments made in case anyone ever wants to see records.
And claim the 1k tax relief
Johnnytheboy said:
I keep all my bank statements too, plus somewhere there is a rental agreement.
Good - that's what HMRC want (as long as the bank statements reveal the whole story, of course).I've taken part in enough tax investigations over 45 years to know what evidence HMRC likes to see. I've seen costs being disallowed because the taxpayer's record of the cost was considered inadequate as "proof".
Gassing Station | Finance | Top of Page | What's New | My Stuff