Chapter 5 - Property income and the Accrued Income Scheme

Question 1

How is property income taxed?

Answer 1

rent minus expenses

Question 2

What are four examples of allowable deductions for a property business to make?

Answer 2

Expenses wholly and exclusively for a property business:
1) Insurance
2) Agents fees and other management expenses
3) Repairs
4) Interest on a loan to acquire or improve non-residential property

These are all allowable pre-trading if occurred within the last 7 years

Question 3

What rate of tax relief is given to a residential property?

Answer 3

20%

Question 4

When must an individual/partnership use the accruals basis for property income?

Answer 4

If property income exceeds £150,000

Question 5

How do you treat property losses?

Answer 5

1) Property income for that year becomes nil
2) A loss is carried forward to set against the first available property profits

Question 6

How much can a rent a room of a furnished room in a main residence be up to in order for it to be tax free

Answer 6

£7,500

Question 7

What are the two choices open to someone who’s rent a room income is greater than £7,500?

Answer 7

1) On gross receipts less £7,500
2) Under the normal rental income rules (income minus expenses)

Question 8

What is the formula to calculate lease premiums for income to landlord?

Answer 8

Rent = Premium * ((51-Duration of lease)/50)

Question 9

What is the formula to calculate lease premiums paid by traders?

Answer 9

Amount assessed on landlord / life of the lease

Question 10

When does the accrued income scheme apply in relation to UK Government Security (gilts)

Answer 10

If the gilts have a total nominal value of more than £5,000