UK Tax query

[RSpiston]

Just been sorting out 'er indoors tax return. I thought I understood how tax works but perhaps not

So, in a nutshell :

Has no paid employment or pension income.
Is a landlady for one flat - taxable profit £7,400
Untaxed UK interest - £1,100
Dividends from UK companies - £5,500

Total income received - £14K
Minus personal allowance of £12,570 of course

Therefore total income on which tax is due - £1,430

HMRC has worked out the tax to be paid as.....NIL. I don't get it ! Not complaining but just out of curiosity why zero tax to be paid on the £1,430 ?!?

[borrowdale]

£2k dividend allowance? https://www.gov.uk/tax-on-dividends

[Keypad]

Hi,
Thanks to that kind Mr Osborne (remember him?), there's three Allowances that reduce the bill:
Property - £1,000, so the taxable amount is £6,400;
Interest - Savings Allowance of £1,000 reduce the amount chargeable to £100;
Dividends - The Dividend Allowance was £1,000 in year ended Apl 2023, so £4,500 chargeable.

So total income chargeable to tax is: 6,400 + 100 + 4,500 = £11,000, which is less than the Personal Allowance of £12,570, so tax = Nil.

NB: Dividend Allowance is falling to £500 from Apl 2023

[Armitage.Shanks]

Personal Savings Allowance of £5000 also comes into play

https://www.moneyhelper.org.uk/en/savings/types-of...

[RSpiston]

Keypad said:

Hi,
Thanks to that kind Mr Osborne (remember him?), there's three Allowances that reduce the bill:
Property - £1,000, so the taxable amount is £6,400;
Interest - Savings Allowance of £1,000 reduce the amount chargeable to £100;
Dividends - The Dividend Allowance was £1,000 in year ended Apl 2023, so £4,500 chargeable.

So total income chargeable to tax is: 6,400 + 100 + 4,500 = £11,000, which is less than the Personal Allowance of £12,570, so tax = Nil.

NB: Dividend Allowance is falling to £500 from Apl 2023

Many thanks Keypad - that makes perfect sense - unlike HMRC's calculation which just shows nil tax due, no workings out as above.

I knew about the Savings and Dividend allowances, the Property allowance passed me by or I forgot it

[UrbanAchiever]

I've read that the £1k allowance for property is only applicable if you don't offset any costs against your rental income when assessing your profit. Does she offset any costs?

[PM3]

UrbanAchiever said:

I've read that the £1k allowance for property is only applicable if you don't offset any costs against your rental income when assessing your profit. Does she offset any costs?

....and moot , as 1,570 allowance left to absorb such quandary .

[thekingisdead]

UrbanAchiever said:

I've read that the £1k allowance for property is only applicable if you don't offset any costs against your rental income when assessing your profit. Does she offset any costs?

That’s correct, AFAIK

If your costs are below £1000, you can claim the full £1000 as costs (barmy if you ask me but hey ho)

If your costs are above £1000, then obv you want to claim full costs.

The first £1000 of rental income is not tax free!

[Eric Mc]

And don't forget the rather complicated way tax relief is given for mortgage interest these days too .

The old TV ad for Self Assessment used to say "tax doesn't have to be taxing" - but it is.

[RSpiston]

UrbanAchiever said:

I've read that the £1k allowance for property is only applicable if you don't offset any costs against your rental income when assessing your profit. Does she offset any costs?

Yes, she does offset costs - which are always well in excess of £1000, so have ignored the £1K allowance. As others have said, she is still below the personal tax limit ( just ) so nil tax this time. For the current tax year, I foresee she'll be over the £12,570 limit so will investigate ISA options for her savings.