Property Income

Question 1

what is the basis of assessment for property income

Answer 1

Cash unless over £150k then accrual

Question 2

What are the allowable property deductions

Answer 2

Insurance
Finance costs
Legal and professional costs
Rates and taxes
Cleaning, gardening
Repairs and maintenance
Bad debts - accruals only

Question 3

What is the treatment when the Landlord lives in property for part of the tax year

Answer 3

Time apportion expenses for when property is available to rent

Question 4

What is the treatment for Capital expenditure for property income

Answer 4

Capital allowances on P&M used for repairs and maintenance
Motor vehicles used in the property businesses

Question 5

What is the treatment for purchasing domestic items e.g beds

Answer 5

Initial expense - no relief
Cost of replacing them is allowable (reduced by process on old asset)

Question 6

What is the treatment for Replacing domestic items

Answer 6

Relief available for a like for like replacement
No deduction for element of improvement (unless purely because of tech advancements)

Question 7

What is the Finance cost relief calc

Answer 7

Based on 20% of the lower of

Finance costs for the tax year
Property business profits
Adjusted total income (ANI)

Question 8

What is the Property allowance

Answer 8

£1k per tax year

Question 9

When does the property allowance apply automatically

Answer 9

If the rental receipts are not more than the property allowance (£1k)
Property income will be £0 i.e allowance cannot create a loss

Question 10

When should the taxpayer elect for property allowance

Answer 10

If rental receipts >£1k and expenses <£1k

Question 11

When should the taxpayer not use the auto property allowance

Answer 11

When receipts less expenses creates a loss

Question 12

What happens with property income losses

Answer 12

Loss is carried forward against first available future income from property

Question 13

What is Rent a room relief

Answer 13

Lodger renting a furnished room in the main residence

Question 14

What is the rent a room limit

Answer 14

£7,500 p.a

Question 15

If gross income from rent a room is more than the limit, what should the landlord choose the lower of in the property income calculation

Answer 15

Choose lower of
rent a room relief (expense defaults at £7,500)
or
Normal calc (income less expenses)

Question 16

What happens where two or more people share a home for property income calc

Answer 16

Rent a room relief is now £3,750 even if there are 3 or more co owners