There are now just around 3 weeks to go until tax return deadline day. It was reported that around 8,000 taxpayers took a break from festivities to file their tax return on either Christmas Day or Boxing Day! But if you have yet to complete your self assessment tax return, you will need to move fast. By 31st January 2017, you will need to file your tax return and pay any tax owed to avoid penalties. In addition, if HM Revenue and Customs (HMRC) require payments on account towards the 2016/17 tax year, then this first payment is also due by 31st January 2017.
Whilst 30th December has passed, it is important to note this date for your next tax return; this is the date to complete your tax return if you would like your outstanding tax collected through your PAYE notice. However, there are conditions to meet here, such as the liability being less than £3,000.
If this is your first year completing your tax return, you may find this self assessment tax guide useful.
Landlords letting fully furnished properties should be warned that your tax return due by the end of this month, is the last year you may claim for wear and tear allowance. This is due to HMRC abolishing this from 6th April 2016 onwards, therefore affecting tax return periods from the 2016/17 year onwards. On the plus side, though, you will be able to claim for the replacement of moveable furnishings from the 2016/17 tax return deadline period onwards, as will all other landlords of buy to let property, except for Furnished Holiday Lets who have a different tax treatment. It is important to note that it is only the replacement cost which is claimable, not the original cost. So, if you replaced, say, a washing machine, then this may be claimable, but if you purchased for your tenant a brand new tumble dryer which has never been in the property before, this would not be claimable; although if this was replaced in a few years’ time, then this would be claimable. The replacement must be like-for-like or the nearest modern equivalent, with HMRC also allowing you to claim costs incurred when you dispose of the previous furnishings. However, you also need to account for any proceeds received for the replacing the furnishing.
In recent times, there has been a large focus on Section 24 and the upcoming restriction of mortgage interest and finance cost claims. Whilst this 4-year phase in commences in April 2017, it is worth pointing out that this is the 2017/18 tax year, and so this will first be applicable for the tax return due for filing by 31st January 2019. Nevertheless, as we have stressed before, it is extremely important to review your own position, taking any necessary action as part of your overall strategy.
There are a huge number of expenses which may be deducted from your rental income when calculating your taxable profit, and if you are in any doubt, it is highly recommended to seek professional assistance from a property tax advisor such as www.rita4rent.co.uk In particular, repairs can often be a complex area, as sometimes they may be deemed an improvement cost, and therefore not claimable against rental income, but instead against potential capital gains on future sale.
As an RLA member, please do not forget too that your membership fee is an allowable deduction against your rental income. When new clients approach us, this is a regularly occurring transaction which is missed by landlords. HMRC state in their property income manual (PIM2205) that landlords may claim for “subscriptions to associations representing the interests of landlords.”
Finally, please note the following Tax Return deadline dates and other important dates for your diary in the coming year: