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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4717
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Im a paye tax payer Bought buy to let July 2012. Income

Customer Question

I'm a paye tax payer Bought buy to let July 2012. Income 2012/2013 £6750 but expenses higher due to renovation of property

Have tried to get advice from HMRC but am not confident on what I've been told. They say that If the income less than 10k and there is a loss, I should write them a letter rather than complete tax return.

Is this advice correct? And what renovation expenses can I set against rent income and what to capital gains when I sell?
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

HMRC guideline on who needs to complete a tax return is as follows:

If you are an employee and already pay tax through a PAYE code, you can sometimes ask for tax that you owe on income, such as savings and property, to be collected through your code number. You'll need to complete a tax return instead if the income you receive is:

- £10,000 or more from taxed savings and investments

- £2,500 or more from untaxed savings and investments

- £10,000 or more from property (before deducting allowable expenses)

- £2,500 or more from property (after deducting allowable expenses)

In your case, as you think the property income is likely to generate a loss and not a profit then I would recommend my clients to file a tax return and report the loss on the tax return for it to be carried forward and offset against future profits.

If your income is less than £10,000 before deduction of allowable expenses or less than £2,500 after deduction of allowable expenses then you not required to file a tax return, instead you can write to the tax office and report the figures.

Allowable expenses -

Expenses incurred that are deemed repairs and maintenance are allowable expenses against rental income...e.g. repairs to the kitchen, bathroom, garden fence, windows or roof. Painting the house is also allowable expense against income.

On the otherhand, replacing of central heating system, replacement of roof and replacing old bathroom and kitchen with modern and new equipment is expenditure of a capital nature enhancing the value of the property and this is allowable against capital gain when the property is sold.

More information on 'Do you need to complete a tax return' can be found here

http://www.hmrc.gov.uk/sa/need-tax-return.htm#2

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

 

Expert:  taxadvisor.uk replied 2 years ago.
Jackie, some additional information for your consideration.

Any expenditure you incurred before the property was first let and is deemed expenditure necessary to enable you to rent the property, HMRC is likely to treat it as capital and allowable against eventual capital gain and not rental income.

Expenditure since renting the property and deemed repairs and maintenace would be allowable against rental income.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Expert:  taxadvisor.uk replied 2 years ago.

Hello Jackie

I notice you have viewed my response to your question on reporting of profits from property income and what renovation expenses can be set against rental income (JACUSTOMER-rge22a4w- Last Viewed on 10/12/2013 at 01:07).

Just checking to see if you have any issues relating to your question that I may not have addressed.


Please let me know if I can be of further assistance.

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