Self assessment question
Discussion
It's just the interest element, not the capital.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Ta...
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Ta...
HIS LM said:
Is the mortgage payment allowable for tax relief on a buy to let or is it just the interest?
If not what else is deductable if anything
Think about it. L lend you £10,000. You repay me £10,000 exactly. That is a "non-event" for tax purposes because you had no income and I had no expenditure.If not what else is deductable if anything
I lend you £10,000. I cahrge you £2,000 interest for the priveledge. You therefore repay me £12,000. Over time therefore, the loan cost you £2,000. It is the £2,000 that can be offset agaionst the rent.
Other offsetable costs are -
repairs
maintenance
property insurance
agent fees
advertising for tenants
legal fees regarding removing tenants
Council Tax or Water Charges met by the landlord
ground rent paid by the landlord
repalcement costs of furniture (if a furnished let)
If a furnished let, the landlord can opt to make a Wear and Tear claim instead of the actual furniture replacement cost. The 10% is applied to the Gross Rent less Council Tax and Water Charges.
You are limited in what you can do with rental losses. In essence they can only be offset against rental profits.
If you make a loss of, say, £5,000 in 2008/09, you can carry the losses forward to 2009/10. If a further rental loss of £4,000 was made in 2009/10, then £9,000 worth of losses can be carried forward to 2010/11. If there was a rental profit of £5,000 in 2010/11, the brouight forwaqrd losses of £9,000 are set off against the profit thereby wiping them out. The remaining unused losses can then be carried forward to 2011/12.
The rules for holiday lets are different to ordinary lettings. a Loss on a holiday let is treated like a loss from a trading business/self-employment - which is much more flexible.
If you make a loss of, say, £5,000 in 2008/09, you can carry the losses forward to 2009/10. If a further rental loss of £4,000 was made in 2009/10, then £9,000 worth of losses can be carried forward to 2010/11. If there was a rental profit of £5,000 in 2010/11, the brouight forwaqrd losses of £9,000 are set off against the profit thereby wiping them out. The remaining unused losses can then be carried forward to 2011/12.
The rules for holiday lets are different to ordinary lettings. a Loss on a holiday let is treated like a loss from a trading business/self-employment - which is much more flexible.
HIS LM said:
Sorry another question on overseas rental income what exchange should I use to convert Euros into GBP
You have a number of choices. You could convert every transaction at the rate that pertained on the day of each transaction OR
you can use an average rate for the year. I would use this - based on the rates of exchange at 6 April 2010 and 5 April 2011
HMRC can't really argue if you use these rates from their own website -
http://www.hmrc.gov.uk/exrate/index.htm
HIS LM said:
So what is allowable wear and tear or renewals basis neither has been applied before on this property
If the property was furnished prior to renting, then you have the choice of claiming 10% of rents per annum as an allowable deduction OR the cost as expended on renewing the furnishings (beds, settees, furniture etc).Repairs on other areas (such as a new tap, washing machine etc) are still 100% allowable as expended.
If you haven't claimed the 10% before, you have 2 days to make a late claim for the 2009/10 tax year by "repairing" your return as well as the opportunity for 1 year and 2 days to repair the 2010/11 tax return. You can also claim for some earlier years but this will require written correspondence with your tax office which again you should be RECEIVED by HMRC before the 31st to maximise the number of years available to claim for.
This is normally a valuable deduction so I advise you to act quickly.
Get in touch if you need further help.
David
The normal 10% Wear and Tear allowance is based on 10% of the Gross Rents MINUS local council tax and water charges.
If you make this claim, you are blocked from claiming for the actual cost of replacing furniture and curtains etc. So it isn't always the best option to go for.
It works like this -
Rent Recceived in Year (saY) - £30,000
Council Tax (say) - £1,000
Water Charges (say) - £200
Insurance (say) - £300
Agents Fees (say) - £1,200
Replacement furniture - £1,000
If you go the "actual" route, teh taxable rental profits will be - £26,300
If you go down the 10% Wear and Tear Route you won't claim the £1,000 furniture cost, instead you would claim 10% of £30,000 less £1,000 and less £200) i.e. £28,800 X 10% = £2,880.
Therefore your taxable rental income would be £24,420
In this scenario the W&T claim is more beneficial. This may not always be the case but once you have elected to use the 10% W&T claim, you must stick with it for as long as the property is rented out.
If you make this claim, you are blocked from claiming for the actual cost of replacing furniture and curtains etc. So it isn't always the best option to go for.
It works like this -
Rent Recceived in Year (saY) - £30,000
Council Tax (say) - £1,000
Water Charges (say) - £200
Insurance (say) - £300
Agents Fees (say) - £1,200
Replacement furniture - £1,000
If you go the "actual" route, teh taxable rental profits will be - £26,300
If you go down the 10% Wear and Tear Route you won't claim the £1,000 furniture cost, instead you would claim 10% of £30,000 less £1,000 and less £200) i.e. £28,800 X 10% = £2,880.
Therefore your taxable rental income would be £24,420
In this scenario the W&T claim is more beneficial. This may not always be the case but once you have elected to use the 10% W&T claim, you must stick with it for as long as the property is rented out.
sumo69 said:
If the property was furnished prior to renting, then you have the choice of claiming 10% of rents per annum as an allowable deduction OR the cost as expended on renewing the furnishings (beds, settees, furniture etc).
Repairs on other areas (such as a new tap, washing machine etc) are still 100% allowable as expended.
If you haven't claimed the 10% before, you have 2 days to make a late claim for the 2009/10 tax year by "repairing" your return as well as the opportunity for 1 year and 2 days to repair the 2010/11 tax return. You can also claim for some earlier years but this will require written correspondence with your tax office which again you should be RECEIVED by HMRC before the 31st to maximise the number of years available to claim for.
This is normally a valuable deduction so I advise you to act quickly.
Get in touch if you need further help.
David
Thanks David,Repairs on other areas (such as a new tap, washing machine etc) are still 100% allowable as expended.
If you haven't claimed the 10% before, you have 2 days to make a late claim for the 2009/10 tax year by "repairing" your return as well as the opportunity for 1 year and 2 days to repair the 2010/11 tax return. You can also claim for some earlier years but this will require written correspondence with your tax office which again you should be RECEIVED by HMRC before the 31st to maximise the number of years available to claim for.
This is normally a valuable deduction so I advise you to act quickly.
Get in touch if you need further help.
David
Just to clarify the property is in EU it is occupied all year by the same people and it was fully furnished prior to renting. So can I apply the 10%
of rental income allowance (it's easier for me to keep track)
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