Landlord Tax Return Errors

How to Avoid Landlord Tax Return Errors

Are you done with rejections from the HMRC for your land?  Here’s how you avoid landlord tax return errors.


Use the property rental toolkit to avoid landlord tax return errors


The best thing to happen to you would be the toolkit provided by HMRC. This toolkit avoids errors, some of which are discussed briefly below.


Rely on Computation 


For unincorporated property businesses, a cash basis should be a priority to qualify. The landlord does not elect to use the accruals basis. The moment you find a business moves out of the cash basis, transitional adjustments may be needed.

In some circumstances, a trade of providing services may be carried on in addition to the let of the property, and in some cases, the letting may amount to a trade.

It is important the correct computational rules are used.


How Record Keeping Works


Poorly-kept records mean that you’re overlooking things.  The authority does not take any income into account, and there may not be any allowable expenses. Property disposals may also be missed.


Take Care of your Property Income Receipts


All income that comes from an interest in land is included as receipts of the property rental business. Receipts include payments in kind (maybe work done on the property in lieu of rent). The casual or one-off letting income is treated as income from a property rental business.

Profits and losses are treated separately quite opposite the other rental fee. Our expert accountants make sure that as a UK resident if your land is owned by the same person or persons, income and expenses are combined to work out the overall profit or loss for the property rental business.


Deductions and expenses


Expenses incurred wholly and exclusively for the purposes of the property rental business can be deducted in the computation of profits.

Problems may arise where an expense has both a business element and a private element (for example, a car or phone used both privately and for the business).

A deduction can be claimed only for the business part where this can be identified and meets the wholly and exclusively test.

The way in which relief for finance costs is given is shifting from relief by deduction to relief as a basic rate tax reduction. Make sure that the split is correct for the tax year in question. Make sure relief is done the right way.


How much Allowances and Reliefs Must One Expect


There are various reliefs that may be available to those receiving rental income.

Rent-a-room relief is available where a room is let furnished in the taxpayer’s own home, enabling receipts of £7,500 a year to be enjoyed free of tax.

The property income allowance of £1,000 means that rental income below this level does not need to be returned to HMRC. Where income exceeds this level, the allowance can be deducted instead of actual expenses where it’s beneficial.

Capital allowances can be claimed in certain circumstances. They are available on certain items that belong to the landlord. These are used in the business, for example, tools, ladders, vehicles, etc.

However, they’re not available for domestic items in a residential property for which a replacement relief is available instead. Capital allowances are similarly not available for plant and machinery in a residential property unless it is a furnished holiday let.


How to Deal with Property Rental Losses                 


Property rental losses must be treated correctly. They can only be carried forward and set against future property profits of the same property rental business.


Check out the Checklist Once More


The checklist within the toolkit can be used to ensure that everything has been taken into account and that nothing has been overlooked.


Additional note: HMRC’s property rental toolkit 

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