Property Income Flashcards
Definition of property income
Exploiting an estate, interest or right in over land as a source of rents or other reciepts
Property income allowance
£1000
What happens if the property is partly owed occupied and partly let
Any expenditure must be apportioned accordingly
What is the tax reducer for mortgage
20% (only of interest part of mortgage)
What are the allowable deductions from property income
The deductions that are allowed from property income are those incurred “wholly and exclusively” for the purpose of letting the property
What are some examples of the allowable deductions on property income
- repairments and maintenance but not improvements
- insurance of property and contents
- council tax and rates
- rent ( if sub let)
- interest on a loan to purchase or improve property (20% tax reducer)
- costs of providing services to tenants eg cleaning
- management costs
- bad debts
What happens to property loss
Is carried forward and used against first available property income
In what instance would a reduction be allowed for fixtures and furniture
Replacement items
Describe rent a room relief
- available to either owners or tenants who let furnished accommodation which is part of their only or main residence
- annual gross rents up to £7500 are exempt
- relief is per property
- when rent exceeds £7500 you can
a) be assessed on gross rents over £7500
b) be assessed under normal property rules
Relief for certain capital expenditure is in the form of capital allowances on:
- plant and machinery used in repair, maintenance or management of the property
- conversion/renovation of vacant space above shops/ commercial premises to provide flats to let
What is the rules regarding Furnished holiday let’s
- Let on a commercial basis
- Be available for let as holiday accommodation for at least 210 days in a year, be actually let for 105 days at least
- Not be let to the same tenant for more than 31 consecutive days
- Not in longer term accommodation for more than 155 days in the tax year
If more than one property is let (furnished holiday let’s) what is the rule surrounding days
If every property satisfies the 210 rule but not all satisfy the 105 rule they can all be treated as holiday let’s if the average period of the let exceeds 105 days
What are some advantages of rental property being regarded as furnished holiday let
- Income is earned and personal premiums may be relieves against it
- Capital allowances are available for plant and machinery including furniture
- Business reliefs are available for CGT purposes
Where the tenant carries on a trade or profession and pays a lease premium for business premises, what is the amount assess on the landlord and tenant as
Assessed of landlord as property income
Assessed on tenant business expense spread equally across the term of the lease
Regarding lease premiums, what is the amount assessable as property income
The premium LESS 2% for each year of the lease except the 1st year
What is the calculation of lease premium property income amount assessable
Premium = a
Less (2% x yr-1 x a) = b
Taxable property income = a-b
What is the property income for the landlord
Amount assessed on tenant / duration of lease
What is a lease premium
A lease premium is a lump sum payable to a landlord by a tenant when a lease is granted
What is the definition of a trust
An arrangement whereby property is held by persons known as trustees for the benefits of other persons known as beneficiaries
How is a trust created
- by deed
- terms of a will
- by the courts
What are some types of trusts
Mixed trust
Accumulation trust
Interest in possession trust
Discretionary trust
Who is liable for the payment of IT and CGT in discretionary and interest in possession trusts?
Trustees
What are the main points when discussing “interest in possession trusts”
The beneficiary is entitled to income forms the trust as it arises
Often a different is entitled to the trust capital
What are the main points when discussing “discretionary trusts “
Trustees have discretion
