Property Income

Question 1

What basis is property income calculated on if rental receipts exceed £150,000?

Answer 1

Accruals basis.

Question 2

What basis is property income calculated on if rental receipts is less than £150,000.

Answer 2

Cash basis.

Question 3

What are the two ways you can calculate property income on property?

Answer 3

Lower of:
1) Rental income - allowable expenses
2) Rental income - property allowance

Question 4

What is the property allowance per individual per tax year?

Answer 4

£1,000.

Question 5

What are the two ways you can calculate property income on a room being rented out?

Answer 5

Lower of:
1) Rental income - allowable expenses
2) Rental income - rent-a-room relief

Question 6

How much is rent-a-room relief and how is it reduced when there are more than 1 owners of the property?

Answer 6

• Rent-a-room relief is £7,500.
• If there is more than one owner, this allowance is divided by the number of owners e.g. 2 owners would mean rent-a-room relief of £3,750 each.

Question 7

Is mortgage interest on non-residential property an allowable expense?

Answer 7

Yes, it is.

Question 8

How is mortgage interest on residential property treated?

Answer 8

It acts as a tax reducer (20% of the interest) and is deducted from the income tax liability of the individual.

Question 9

You can’t deduct new furniture but you can deduct replacement furniture - how is this deduction calculated?

Answer 9

Cost of replacement furniture - disposal proceeds + costs of disposal.

Question 10

Relief is calculated on 20% of the lower of the following this:

Answer 10

• Finance costs (mortgage interest) for the tax year + any finance costs brought forward
• Profits of the property business for the tax year after using any brought forward losses
• Adjusted total income = non-savings income - losses & reliefs - personal allowance

Question 11

If the lowest is either property business profits or adjusted total income - how is this carried forward?

Answer 11

The difference between finance costs and property business profits/adjusted total income is used to calculate the basic rate tax reduction in the following years.

Question 12

Can this tax reduction be used to create a tax refund?

Answer 12

NO!!!!

Question 13

Are capital payments an allowable deduction (expense)?

Answer 13

No.

Question 14

Are brought forward losses on property deducted when calculating taxable property income?

Answer 14

Yes.

Question 15

Are loan payments deductible from property income?

Answer 15

No.