Other Flashcards
What is Stamp Duty Land Tax and how is it paid?
Tax on land transactions
Assessed and paid under self assessment
Complete an SDLT return
Pay within 14 days of ‘effective’ transaction -usually completion.
Not payable on part of purchase relating to carpets, curtains, free standing furniture and domestic appliances
What is SDLT relief for first time buyers?
Don’t pay on properties costing ££425,000 or less
Between £425 and £625 5% only payable on excess over £425
Normal rates on property over £625
Tax Advantages of FHL over buy to let
Full mortgage interest relief whereas BTL is limited to basic rate reduction
Profits counts as UK relevant earnings for pension contributions
CGT rollover relief/holdover relief may be available
Business asset disposal relief may be available
IHT BR may be available after 2 years if additional services provided
What is qualification for FHL?
furnished and let on a commercial basis
Available to let at least 210 days in the tax year
On a commercial basis to the public and actually let for more than 105 days in the tax year
Can be let for more than 31 days but these periods must not total more than 155 days in the tax year
Doesn’t have to be in an acknowledged holiday resort and the tenants don’t have to be on holiday.
What is averaging election in terms of FHL?
If a FHL is not let at least 105 days in total in a tax year then an average can be taken over 2 or more properties
May enable them all to qualify
Also can take a period of grace election if property has met occupancy threshold in previous years
How is mortgage interest dealt with on a let property?
Tax relief available for mortgage interest at basic rate tax deduction
20% of the finance costs (annual interest) is deducted from the total income tax liability.
Not applicable to a furnished holiday let or non-residential property.
When does an estate not need to complete a trust and estate tax return (SA900)?
If the estate was valued less than £2.5m
Total income tax and CGT is less than £10k
Did not sell more than £500k worth of assets in any single tax year during admin period
What responsibilities does the executor have for income tax reporting?
Complete an individual tax return for income received by deceased up to date of death and claim any reliefs (be specific to case study e.g gift aid)
Complete return for estate - either SA900 (trust and estate tax return) or simplified arrangements
Any tax due must be paid from the estate by 31/01 after the tax year of death
And executor completes R185 for beneficiary of the estate with details of tax deducted
What is adjusted net income for high income child benefit charge?
Income after deducting the gross amount of pension payments and donations to charity under gift aid
What can you do to reduce impact of higher child benefit charge?
Arrange affairs to ensure neither has income over £50k by transferring income between them providing its on an unconditional and outright basis
Reduce adjusted net income by making a pension contribution or donations to charity using gift aid
Forgo child benefit to avoid inconvenience of tax charge and need to do a tax return
What are the benefits of a buy to let property being treated as a furnished holiday let?
Counted as UK relevant earnings for purposes of pension contributions.
Offset mortgage interest against rental income at full marginal rate
Can claim expenses e.g asset management fees
Could use CGT holdover relief
Business asset disposal relief available on disposal after 2 years ownership
Claim capital allowances on furniture/equipment/fixtures
What factors indicate some one is employed?
Can’t sub contract - there is control over the way they work
Appears to be working for just one client - integral to the business
Works set hours
A contract of service (employment)
Get benefits/holiday/sick pay
What factors indicate self-employment?
Provides own equipment
Has a contract to provide services
Takes own financial risk
Pays own pension contributions/no employee benefits
Ability to sub-contract or refuse work/flexibility to choose work
Rules for rent a room relief
Gross rent no more than £7,500 = no income tax
Property in uk
Let accommodation to be use as a residence
Not applicable to a self contained unit or unfurnished accommodation
If more than one person receives the rent max is £3,750 each
Excess over allowance is added to total income and taxed accordingly
Can’t deduct expenses
What is letting relief?
Owner must be in shared occupancy with tenant
Gain on part of property let is exempt up to lesser of £40k and the exemption on the part occupied by owner
Each owner allowed up to £40,000
How are REIT income paid?
exempt part - net of 20% tax - classed as property income
Non exempt part - taxed as a dividend paid gross
