Lecture 2 Flashcards
Total receipts & expenses
Cash basis - cash received and paid during the year
Accrual basis - not looking at receipts more contract term
How to decide to use cash / accrual basis
Yes - >150,000
No - the option between cash and accural basis
Allowable expenditure
Repairs & maintenance Insurance Administration Water & council tax Interest paid on loans to purchase rental properties
Replacement domestic items relief (RDIR)
If some items are domestic used are provided in the property
Furniture, washing machine, fridge
Cost of replacing these items can be claimed
However it is of a similar value
Eg similar price of 5kg washing machine
Losses
The amount of receipts from all properties is less than amount of allowable expenses
I’d there is an overall loss this is carried forward and relieved against the first available property income in the next tax year
Losses can’t be greater than property income for year
Lease premium
Renting is for short period while leasing is probs long period
Premiums of long lease (gen >50 years are charged to CGT not income tax)
Short term are charged to income tax
Taxable amount is equal to amount of the premium, less 2% for each year of the lease except the first
“Rent-a-room” relief
If a taxpayer lets an accommodation which is
- furnished
- forms part of his / her main residence
The amount of relief available is £7500
Eg property income would be total rent received less £7500
Furnished holiday lettings
Several tax advantages:
- mortgage interest restrictions doesn’t apply
- capital allowance may be claimed in respect of the furniture
- business capital gains tax relief may be available
- income is regarded as earned income
Definition of furnished holiday letting
Property must be in UK or EU
Let out to earn property
Must be available to let for at least 210 days in the tax year - must be actually let out for at least 105 days
If property is let out to same person for more than 31 days to same person then period is not counted
The sum of all long term occupations should not be more then 155days
FHL Averaging
If someone has more then one property
But some properties fulfil the 105days occupancy conditions but others don’t
The taxpayer can use the average occupation of any combo of properties that would help 1/more properties to meet occupancy conditions
2 types of ISA
-cash ISA
-stock & share ISA
works like a regular saving account
Any interest is tax free
Any dividend / capital gain is tax free
The maximum amount is restricted to £20,000 for tax year 20/21
This amount can be split between cash and stock and share ISA
Advantages of self employment
- a wider range of expenses is allowed against income
- income tax is generally paid much later then employees
Distinguish between employed / self-employed
A contract of service = employed
A contract for service = self-employed
Non-taxable employment income
Benefits in kind costing no more than £50 Free meals in staff canteen Staff parties Approved mileage allowances Removal expenses up to £8000 One mobile for both business and private
Benefits in kind
Any employment income received in the form of gds/services rather than money
Considered to be income from employment
