Self assessment tax query
Discussion
I have a couple of buy to let properties and filling in the self assessment, I have made roughly £12k profit (includes about £6k expenses in mortgage interest).
The online calculator is saying I owe £8.5k for the 2016-17 year and another £4k for the first 6 months of 2018. I am a 40% tax payer through PAYE.
Doesn't sound right to me? Am i missing anything obvious? Think I need to find someone to verify my return...
The online calculator is saying I owe £8.5k for the 2016-17 year and another £4k for the first 6 months of 2018. I am a 40% tax payer through PAYE.
Doesn't sound right to me? Am i missing anything obvious? Think I need to find someone to verify my return...
Tax relief on mortgage interest changed in April last year - essentially you only receive relief at 20% not 40% (assuming you are a 40% tax payer).
However, the way in which it is calculated has also changed, in that your taxable income now includes the mortgage interest (i.e. it is not discounted before tax is calculated, but afterwards). But this shouldn't affect you if you are a 40% tax payer without your rental income (i.e. it should only affect you if your rental income pushes you into the 40% bracket).
Not sure I've explained that too well! Google it - plenty of better explanations on-line.
However, the way in which it is calculated has also changed, in that your taxable income now includes the mortgage interest (i.e. it is not discounted before tax is calculated, but afterwards). But this shouldn't affect you if you are a 40% tax payer without your rental income (i.e. it should only affect you if your rental income pushes you into the 40% bracket).
Not sure I've explained that too well! Google it - plenty of better explanations on-line.
It’s this 17/18 tax year that the mortgage interest relief changes start, and a tapered change for the next 3yrs so not all the relief is removed even this year.
Op feel free to send me some figures and I can take a look as I’ve just submitted mine. I’m not an accountant though so from your original post I’d say it might not be a bad move to employ one before the Jan deadline!
Op feel free to send me some figures and I can take a look as I’ve just submitted mine. I’m not an accountant though so from your original post I’d say it might not be a bad move to employ one before the Jan deadline!
RL17 said:
If you owe more than £1k for the last tax year (16/17) you are liable to pay an estimate for 17/18 in 2 installments .(50% due by 31 Jan and other 50% before 31 Jul). Need to print off detailed calculation and check why tax owed is coming up so high.
Yes, I just got hit with that, my first UK tax bill in 28 years. It calculated I owe just 3k for last tax year, but they wanted 4.6k now, 1.6k in July. 
Eric Mc said:
It's what is called a "tax reducer" rather than an "expense".
If you are completing a 2016/17 self assessment tax return, the old way of dealing with mortgage interest still applies.
That's true, but i think some of the tax being demanded of the OP is for this tax year, so the new rules will apply.If you are completing a 2016/17 self assessment tax return, the old way of dealing with mortgage interest still applies.
The only tax being paid for 2017/18 under Self Assessment rules would be Payments on Account for 2017/18.
The Payments on Account are not actually based on real 2017/18 figures. They are merely the 2016/17 liability amount used as an estimate for 2017/18. They are never correct - and are not meant to be correct.
The Payments on Account are not actually based on real 2017/18 figures. They are merely the 2016/17 liability amount used as an estimate for 2017/18. They are never correct - and are not meant to be correct.
If your actual self assessment tax bill for a particular year exceeds £1,000, HMRC asks you to make Payments on account for the next tax year.
Example.
You complete your 1st SA Return for tax year 2016/17.
It shows your SA tax liability for 2016/17 to be £3,200.
You have to pay the £3,200 by 31 January 2018.
HMRC will also want you to make two Payments on Account (POA) for 2017/18. These will be set at £1,600 each. They are purely estimates based on the 2016/17 liability.
The 1st PAO is payable on 31 January 2018
The 2nd POA is payable on 31 July 2018.
As you can see, you actually have to pay £4,800 on 31 January 2018 (£3,200 plus £1,600).
You can apply to reduce the 2017/18 POA is you know that your income levels are lower for 2017/18 and you have a good indication that the real 2017/18 liability will be less. You have to be careful when reducing a POA because if you overdo it, HMRC will charge interest on any underpaid amounts.
It's simple really. Who needs accountants.
Example.
You complete your 1st SA Return for tax year 2016/17.
It shows your SA tax liability for 2016/17 to be £3,200.
You have to pay the £3,200 by 31 January 2018.
HMRC will also want you to make two Payments on Account (POA) for 2017/18. These will be set at £1,600 each. They are purely estimates based on the 2016/17 liability.
The 1st PAO is payable on 31 January 2018
The 2nd POA is payable on 31 July 2018.
As you can see, you actually have to pay £4,800 on 31 January 2018 (£3,200 plus £1,600).
You can apply to reduce the 2017/18 POA is you know that your income levels are lower for 2017/18 and you have a good indication that the real 2017/18 liability will be less. You have to be careful when reducing a POA because if you overdo it, HMRC will charge interest on any underpaid amounts.
It's simple really. Who needs accountants.
Eric Mc said:
It's what is called a "tax reducer" rather than an "expense".
If you are completing a 2016/17 self assessment tax return, the old way of dealing with mortgage interest still applies.
I don’t recall seeing anything about that on my recent tax return. I’m a pauper though, mortgage is only 400 a month.If you are completing a 2016/17 self assessment tax return, the old way of dealing with mortgage interest still applies.
King Herald said:
Yes, I just got hit with that, my first UK tax bill in 28 years. It calculated I owe just 3k for last tax year, but they wanted 4.6k now, 1.6k in July.
Well worth completing with preliminary gigs the 2017/18 tax return at the start of April this year (only P11D should be outstanding though really you should know that but that will be available in May18). Submit it then you get the cash on account back IF the current tax return year is too high/a one off. When will the removal of tax free allowance start point increase with inflation? It’s not changed in over a decade ditto the £150k super tax band.
You can apply to have Payments on Account reduced if yo think they are excessive. You might already have a fair idea what your 2017/18 income is going to be right now. Consequently, you might be able to make a good estimated guess as to what your 20174/18 tax liability is RIGHT NOW.
If you can do this exercise, you can apply now (using a form called an SA303) to reduce the 2017/18 Payments on Account to a more realistic level.
Alternatively, complete the 2017/18 tax return as soon after 5 April 2018 as you can. This will tell HMRC what the true 2017/18 liability is and it will also indicate if the 2017/18 Payments on Account could be reduced.
If you can do this exercise, you can apply now (using a form called an SA303) to reduce the 2017/18 Payments on Account to a more realistic level.
Alternatively, complete the 2017/18 tax return as soon after 5 April 2018 as you can. This will tell HMRC what the true 2017/18 liability is and it will also indicate if the 2017/18 Payments on Account could be reduced.
Eric Mc said:
.
Alternatively, complete the 2017/18 tax return as soon after 5 April 2018 as you can. This will tell HMRC what the true 2017/18 liability is and it will also indicate if the 2017/18 Payments on Account could be reduced.
That might be worth a go. My accountant has always left it until the very last minute, but that was probably because I never owed anything. Alternatively, complete the 2017/18 tax return as soon after 5 April 2018 as you can. This will tell HMRC what the true 2017/18 liability is and it will also indicate if the 2017/18 Payments on Account could be reduced.
I can probably start doing it myself from now on, as my only income is my pension. And then I won’t have to pay the accountant £150 or more for her ten minutes work.
Do I need to officially inform HMRC, or do anything special, or can I just log into the tax site myself and start entering numbers? I have all that Government Gateway stuff already.
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