Week 3 - Property Income

Question 1

What are allowable expenses in terms of property income? (5 examples)

Answer 1

• Repairs and maintenance
• Insurance
• Cost of providing services to tenants
• Admin costs
• Business rates, water rates and council tax

Question 2

What is the percentage of interest payable for each year that is used to compute property income?

Answer 2

• 2017-18 75%
• 2018-19 50%
• 2019-20 25%
• 2020-21 onwards 0%

Question 3

What is the percentage of interest payable for each year that is used to compute property income?

Answer 3

• 2017-18 75%
• 2018-19 50%
• 2019-20 25%
• 2020-21 onwards 0%

Question 4

Is all income derived from letting properties pooled together?

Answer 4

Yes

Question 5

What is a lease premium?

Answer 5

A lump sum payment made by a tenant to be granted a lease

Question 6

How is a lease premium taxed in the UK?
(E.g short and long lease)

Answer 6

Short lease - Less than 50 years - Income Tax
Long lease - More than 50 years - Capital Gains Tax

Question 7

What can a tenant claim if they pay a short lease premium and use the property for business purposes?

Answer 7

An annual deduction from business profits

Question 8

How is the annual deduction calculated for tenants who pay for a short lease premium?

Answer 8

The landlords income tax assessment on the premium / the length of the lease

Question 9

What is a reverse premium?

Answer 9

An amount paid by a landlord to a tenant to persuade them to take out a lease

Question 10

What is the formula for a lease premium granted on a short lease?

Answer 10

Premium x (51- n) / 50

Question 11

If a taxpayer lets their furnished accommodation, what amount does their gross rent have to be less than for them to be exempt from income tax? If gross rent does exceed £7,500, what may the taxpayer choose to be assessed on?

Answer 11

£7,500 a year
They can choose to be assessed on (gross rent - £7500) or (gross rent - expenses)