Property Income

Question 1

what type of income is property income?

Answer 1

non-savings

Question 2

property income computation?

Answer 2

rental income received xxx
less: allowable rental expenses paid (xxx)
equals: property income assessment xxx

Question 3

what method is used for property income?

Answer 3

cash basis unless property income exceeds 150,000

Question 4

is insurance an allowable deduction for property income?

Answer 4

yes

Question 5

are finance costs relating to non-residential properties allowable?

Answer 5

yes e.g., mortgage interest

Question 6

legal fees?

Answer 6

allowable

Question 7

rates and taxes paid by landlord?

Answer 7

deductible expense

Question 8

ancillary services provided?

Answer 8

deductible expense

Question 9

fixed rate deductions for vehicles used in property business?

Answer 9

deductible

unless capital allowances have been claimed

Question 10

bad debts?

Answer 10

deductible, only relates to accruals basis

Question 11

for property income, capital allowances are available on…

Answer 11

• plant & machinery for repairs & maintenance
• motor vehicles used in the property business (unless fixed rate deduction’s been claimed)

Question 12

are capital allowances available on machinery used in rental property (e.g., furniture)?

Answer 12

no

Question 13

is there relief on the initial expense for purchasing domestic items? (e.g., beds, fridges etc)

Answer 13

no

instead, there’s relief for a like-for-like replacement

Question 14

like-for-like replacements?

Answer 14

allowable expense

Question 15

enhancements?

Answer 15

disallowable expense

Question 16

if you purchase a replacement for a higher price, how is it handled?

Answer 16

purchase price for replacement less what you sold the old one for

e.g., current price is 450, sold the old furniture for 90, expense recognised is 360

Question 17

capital payments on mortgage?

Answer 17

never allowable

Question 18

what relief do landlords get for mortgage interest payments?

Answer 18

mortgage interest * 20%

then deduct this amount of the tax liability

it’s a tax REDUCER

Question 19

the 20% mortgage interest relief is levied on…

Answer 19

the lower of:
- finance costs for the year plus finance costs brought forward
- property business profits
- adjusted total income

Question 20

property business profits?

Answer 20

the profits of the property business in the tax year

Question 21

adjusted total income?

Answer 21

non-savings income after deducting the PA

Question 22

if the lowest is property business profits or adjusted total income…

Answer 22

the difference between that figure and finance costs is carried forward to calculate the basic rate tax reduction in the following years

tax reduction cannot cause a tax refund

Question 23

property allowance?

Answer 23

1,000 per tax year available to individuals, NOT COMPANIES

Question 24

how do you handle property allowance?

Answer 24

you can either deduct
- property expenses
- property allowance (1,000)

you cannot deduct both

Question 25

can you have negative property income?

Answer 25

if you use property allowance, no - cap it at 0 if your expenses exceed your income, yes - you can have a property loss

Question 26

how do you handle property losses?

Answer 26

the period in which loss is incurred, property income will be 0 the loss is then carried forward against the next year

Question 27

rent-a-room relief?

Answer 27

applies when a room is rented, not a whole property

Question 28

rent-a-room limit?

Answer 28

7,500 you can earn 7,500 in rent from a room being rented out tax free

Question 29

computation for rent-a-room relief?

Answer 29

rental income xxx less: rent-a-room relief (7,500) equals: property income xxx

Question 30

normal property income computation?

Answer 30

rental income xxx less expenses (xxx) equals: property income xxx

Question 31

where two or more people share a home...

Answer 31

each has a rent-a-room relief of 3,750 (7,500/2), even if there are three or more co-owners

Question 32

how do you handle the cost of replacing integral fixtures? (e.g., sinks, boilers, fittings)

Answer 32

the cost of replacing fixtures are deductible