4. Property income

Question 1

What does the property income proforma look like?

Answer 1

Rental income received X
Related expenses paid (X)

Assessable income: X

Question 2

In general, what are the allowable expenses for property income?

Answer 2

• Insurance
• Agent fees and management expenses
• Repairs
• Interest on a loan to acquire or improve non-residential property.

Question 3

What basis is property income on?

What does this mean?

Answer 3

Cash basis: this means there is no capitalised expenditure (unless car or assets for use in property).

Question 4

How is tax relief on financing a property to rent obtained? (2)

Answer 4

• 25% of finance cost deducted from income as allowable expense.
• 20% of remaining 75% deducted from total income as a relief

Question 5

How do you calculate a premium?

Answer 5

Premium X
Premium x 2% x (n-1) (X)

= Total assessable to tax

Question 6

What are the requirements for a property to be classed as a furnished holiday letting? (4)

Answer 6

• Let fully furnished on a commercial basis.
• Available to let at least 210 days a year
• Actually let for at least 105 days a year
• Can’t have same long term occupation for more than 155 days

Question 7

How is a furnished holiday accommodation treated in terms of tax? (3)

Answer 7

• Finance costs are fully deductible
• Plant and machinery advantages available for furniture that is replacement (must be of same standard not improvement)
• Capital gains tax rollover relief

Question 8

What is the rent-a-room relief?

Answer 8

£7,500

Question 9

When is property income on an accruals basis

Answer 9

When income exceeds £150,000

OR

If an owner wishes to claim impairment losses (rent not received can be deducted as an expense - would be no relief on cash basis).