Property Income

Question 1

furnished holiday letting

Answer 1

1. Claim capital Allowances on cost of furniture instead of Replacement Furniture Relief
2. Annual Investment Allowance is 100%
3. Relevant earnings in determining the maximum amount that can be invested in a registered pension scheme
4. Rollover Relief available
5. Gift Holdover Relief on the gift of a FHL
6. Entrepreneurs Relief / Business Asset Disposal Relief available on the disposal of a furnished holiday letting

Question 2

Capital Allowances

Question 3

5 Qualifies of Furnished Holiday Letting

Answer 3

1. Must be located in the European Economic Area
2. Must be available to let for at least 210 days in tax year
3. Must actually be let for 105 days in tax year
4. Must be let on a commercial basis. No one person should occupy the letting for more than 31 consecutive days

Question 4

Property income finance costs for Residential Property

Answer 4

If a loan is taken out to either purchase or repair a residential property, there is a restriction on the amount of interest expense that will be allowable.

$0 deduction from property income but

Tax Credit @ 20% deducted from income tax liability for full interest amount

Question 5

How does the interest expense restriction for residential propert

work?

Answer 5

None of the interest will be deducted from property income (100% restriction)

The full interest amount will be used to create a tax credit (a deduction from the income tax liability) at 20%.

Question 6

Premiums granted for short leases

Answer 6

Premium is paid to secure to lease.

Leases less than 50 years is a short term lease

Income element of premium is taxable

Capital element is not taxable

Question 7

Income element of Premium

Answer 7

Premium - Premium X (Lease Years - 1) X 2%

Taxable for the landlord

Question 8

Lessee Relief for Lease Premium

Answer 8

Income element of premium / number of years of lease

Question 9

rent a room relief

Answer 9

This relief is based upon letting a room out in your main residence where you live.

Question 10

Rent a Room Relief 1

Answer 10

If an individual lets a room, furnished, in their main residence – the gross rent up to £7,500 is exempt.

Question 11

Rent a Room Relief 2

Answer 11

This exemption may be ignored if under normal treatment (rental-allowable expenses) the tax payer is able to generate a lower assessable income, that is where the allowable expenses exceed £7,500.

Question 12

Property Business Loss Relief

Answer 12

Relief is only given against future property business profits

Therefore, on cessation of trade, any property business losses, which cannot be relieved in the final year, will be unrelieved.

Question 13

Rental income and allowable expenses will be assessed on an accruals basis when:

Answer 13

Property income receipts for the tax year exceed £150,000

The property business is carried on by a company

An election is made for the accruals basis to apply (elect by 31 January 2025 for 2022/23 tax year)

Question 14

Qualification as Furnished Holiday Letting

Answer 14

The accommodation must be situated in the European Economic Area.

For examplein Malta.

The accommodation must be available for letting for at least 210 days in the tax year.

The accommodation must actually be let for 105 days in the tax year.

The accommodation must be let on a commercial basis.Cannot be let for more than 31 days

Question 15

Benefits of FHL

Answer 15

1. Capital Allowances apply on furniture instead of furniture relief
2. Annual investment allowance is 100%
3. Relevant earnings when calculating the maximum amount that can be invested in a registered pension scheme includes income from a furnished holiday letting
4. MORE TO COME