CH14 - Intro. to Property Income Flashcards
A UK property business is a business which a person carried on for generating income from land in the UK.
Calculation of Profits
Property income is calculated using the cash basis where property income does not exceed ?
£150,000 in the tax year (reduced proportionately where the business is carried on for part of the year).
Under the cash basis, income and expenses are accounted for when money is received or paid.
Calculation of Profits
Where the £150,000 limit is exceeded, ?
the accruals basis is used.
An election can also be made - anniv. of 31 Jan following tax year end.
Under the accruals basis, rents receivable and expenses payable for a tax year determine the property income profit.
Allowable Expenses
Expenses incurred ?
If it’s classed as standard for Govt., e.g., replacing single glazed windows for double glazed, it falls under repairs.
‘wholly and exclusively’ for the letting business are deductible, such as repairs, insurance and council tax.
The landlord can choose either to claim relief for the actual expenditure in respect of vehicles or to claim a flat rate expense based on business miles.
Capital Expenditure
Under the accruals basis, ?
capital allowances may be claimed in respect of plant and machinery used in the property business.
‘Capital allowances are to get the property into a rentable state.’
Capital Expenditure
Under the cash basis, ?
relief is given by deducting the cost of the asset when it is acquired, except in respect of cars where capital allowances can be claimed.
Capital Expenditure
There is no relief under the cash basis or accruals basis for the ?
initial cost of furniture and equipment provided in a furnished residential property (other than furnished holiday lettings).
relief can be claimed for the cost of replacing domestic items used in a residential property.
Relief for Interest
Interest paid on a loan to purchase a commercial property or a furnished holiday letting is ?
deductible in full from property income.
Relief for Interest
Where an individual pays loan interest in respect of a residential property (other than a furnished holiday letting), it is ?
eligible for basic rate tax relief.
The relief is given as a reduction in the tax liability.
Relief for Interest
In a tax year, relief at basic rate is available on the lowest of: ?
- the interest eligible for relief
- the property income for the year less losses brought forward; or
- adjusted total income (net income less savings and dividend income less the personal allowance).
Losses
If there is an overall loss it can only be carried forward against ?
Profit and losses from all UK properties are pooled.
future UK property business income.
Losses on nominal leases, where the landlord does not charge a full market rent, are not allowable.
