Archive for September, 2017

Common misconceptions about tax and letting property

Tuesday, September 5th, 2017

HMRC has published a list of popular misconceptions that taxpayers have about letting property. We have listed below a summary of situations where you will need to declare rental earnings to HMRC:

  • If you inherit property and let it out.
  • If you buy a property as an investment and let it out.
  • Divorcing partners, who decide to let out their jointly owned property, will need to declare their share of any rental profits on their individual tax returns.
  • You may move to a new house due to employment considerations and let out the house you are moving from.
  • You may move into a care home and let out your present home to help pay for the fees.
  • You may buy a property for your son or daughter to use while at university, and they may sub-let to friends on an informal basis and charge a nominal rent, which you use to defray costs. Any surplus monies received from this sort of arrangement will still need to be declared.
  • Moving to tied accommodation can create problems if you keep your existing home and let it out. If the rents you receive cover your mortgage repayments (capital and interest) you may consider that you have not made a profit, but the capital part of your mortgage repayments are not an allowable deduction for income tax purposes.

Also, watch out for the effects of the changes to the rules for repairs and finance costs (interest) that we have covered in recent issues.

If you are concerned that you may be required to declare your rental income, and you have not yet done so, we can help. There is a tried and tested process to bring matters up-to-date. Please call for more information.

Source: New feed

Claiming back professional subscriptions

Tuesday, September 5th, 2017

If your employment requires that you obtain and maintain membership of a professional organisation, you can make a claim to set the cost against your taxable earnings for income tax purposes. As you would expect there are a few hoops you will need to jump through to claim this relief. They are:

  • You must have the professional membership to do your job or if membership helps you with your work.
  • You can only claim back subscriptions to organisations approved by HMRC.
  • You cannot claim back fees for life membership subscriptions.
  • You cannot claim subscriptions you have not paid yourself, for example, your employer has paid them for you.

 

To see the full list of professional organisations and other learned societies that are approved by the tax office visit this page on the GOV.UK website:

https://www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3/approved-professional-organisations-and-learned-societies

Source: New feed

Beware self employed contributions trap

Tuesday, September 5th, 2017

To qualify for the full, new State Pension you will need to have 35 years of contributions. At present, the self-employed pay Class 2 (a fixed weekly amount of £2.85) and Class 4 contributions (9% of profits between £8,164 and £45,000, and 2% of profits over £45,000), but only the Class 2 payments contribute towards your 35 years.

From April 2018, Class 2 contributions are being abolished.

It is likely that from April 2018, if you are self-employed and earn more than the small profits limit (SPL), currently £6,025 for 2017-18, but less than the current lower profits limit (LPL), £8,164 for 2017-18), you will not have to pay Class 4 NIC but you will still receive credits towards your new State Pension entitlement.

Thus far good news for the lower paid self-employed.

Unfortunately, the news is not quite so good if you earn less than the SPL threshold. Up to April 2018, you could top up your State Pension contributions by making Class 2 contributions, at £2.85 per week. From April 2018, you would need to make Class 3 voluntary contributions, and these are currently £14.25 a week.

The annual cost of protecting your State Pension rights would therefore increase from £148.20 to £741.

Self-employed with income below the SPL may be able to achieve the same result if they are claiming other benefits: for example, tax credits, child benefit or Universal Credit. If this is the case they would not need to pay the Class 3 contributions and would still receive credits towards their State Pension entitlement.

Source: New feed

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