Chapter 3 Property income

Question 1

What are the 3 methods to calculate property income

Answer 1

• Rent income less property allowance
• rent income received less allowable expenses paid (cash basis)
• Rent income receivable less allowable expenditure payable

Question 2

What is the property allowance

Answer 2

£1,000 per year

Question 3

What is the threshold to stop using the cash basis

Answer 3

£150,000 per year (assumption is the cash basis)

Question 4

Allowable expenses for property income

Answer 4

Legal, admin, professional costs 
interests paid (to buy or improve non-residential property)
Rates/taxes
Cleaning etc.
Insurance
Fixed rate deductions on motor vehicles

Question 5

Replacement relief

Answer 5

Amount spent replacing items (not including amounts representing improvements)
LESS Proceeds from sale of old
PLUS cost of disposing old

Question 6

Finance costs ( interest) treatment for property incoem

Answer 6

Given as a tax reduce at 20% of the LOWER of:

1. Finance cost for the year + B/F costs
2. Property income for the tax year
3. Adjusted total income/ taxable non-savings income

Any unused interest should be carried forward

Question 7

Property losses

Answer 7

Carried forward and offsets against first available future profits

Question 8

Rent a room relief

Answer 8

£7,500 per tax year

Eligible if income < £7500

(if house is owned by 2 or more each owner will have £3750 as a relief)