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Keeping on top of your tax obligations

Tuesday, 11th October, 2016

Q: What do landlords need to keep HMRC happy?

It is a legal requirement to keep sufficient records to explain the entries on your Self Assessment return.   Keeping proper records will make it easier for your accountant to complete your return, which could also save you money on accountancy fees.  If you are one of the unfortunate landlords selected for an enquiry by HM Revenue & Customs (HMRC), then good accounting records will enable them to bring it to a speedy conclusion, saving you time, money and sleepless nights.

Q: What is a Self Assessment Return and who needs to prepare one?

Self Assessment is a system HMRC uses to collect Income Tax.  Tax is usually deducted automatically from wages, pensions and savings.  People and businesses with other income must report it in a Self Assessment Return.  HMRC says that you need to send in a tax return if, in the last tax year you received £2,500 or more in untaxed income, from for example letting a property or from savings and investments.

Q: What deadlines apply for Self Assessment Returns?

The tax year is from 6 April to 5 April the following year, and the Self Assessment Return is filled in after the end of the tax year (5 April) that it applies to.  These days you can file your tax return online or if you prefer you can still complete a paper version and post it to HMRC.  The deadline for filling online is 31 January.  The deadline for the paper version is 31 October.

Q:  When do I have to pay HMRC?

If your income tax liability for any tax year is more than £1,000 after deducting amounts paid at source, then you will have to make payments on account to HMRC for the following tax year.  Payments on account for a tax year are due on 31 January during the tax year and 31 July following the tax year.  Because your return will not have been completed by the time, the first payment on account is due, each of the payments on account are half of the previous years liability with any odd penny being allocated to the 31st July payment.  The difference between the two years liabilities is either payable or refunded by 31 January following the end of the tax year.

Q: What records of rental income should I keep?

You should keep details of the dates when you let your property, the rent you receive, any income from services you provide to tenants (e.g if you charge for maintenance or repairs), rent books, receipts, invoices and bank statements, and allowable expenses you pay to run your property such as cleaning, gardening and accounting services, legal fees, agents fees, insurance costs, mortgage interest payments, utility bills and other direct costs of your lettings business such as phone bills, stationary and advertising.

Q: What do i need to know about tax and income from Investments?

You need to keep records of your savings, investments and pensions.  You need to keep all:

  • Bank or building society statements and passbooks.
  • statements of interest and income from your savings and investments.
  • tax deduction certificates from your bank.
  • dividend vouchers you get from UK companies
  • unit trust tax vouchers
  • documents that show the profits you've made from life insurance (called chargeable event certificates)
  • details of income you get from a trust.
  • details of any out of the ordinary income you've received, like an inheritance

Q: What are the tax implications of selling a property.

You may have to pay Capital Gains Tax if you sell (or dispose of) a Buy to Let property and make a profit.  You must make sure you keep receipt, bills and invoices that show the date and the amount you paid for the property and of any additional costs like fees for professional advice.  Stamp duty and improvement costs.


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