Calculating rent in the tax year starting 6th april

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    Calculating rent in the tax year starting 6th april

    I am a new landlord and am filling out my first tax return by I have a query about the tax year dates.

    On the HMRC toolkit it says that the tax return must be from 6th April 2018 - 5th April 2019, my tenants pay their rent on the 27th of the month and only moved in on October 27th last year.

    So my question is when calculating the rental profits for the year do I have to multiply the monthly rent by 12 then divide by 365 then multiply by the number of days from October 27th - 5th April or do I just include 6 lots of monthly rent ie October 27th to March 27th?

    I am calculating the interest on the mortgage daily but am not sure if I need to do that for the rent as well or if it is whatever day I am paid the rent on as long as it is before 5th April.

    Thanks

    #2
    27th March will be the last date of 2019 because you then didn't receive any income until the 27th April, which is the next tax year.

    Comment


      #3
      The "income tax year" runs from 6th April 2018 to 5th April 2019 and you are required to declared the total rent for year ending on 5thApril.

      So I would calculate your total rent = 5 whole months plus 10 days of the monthly rent ( paid on 27 March).

      Your mortgage lender will issue you a statement showing the annual interest paid up to year-ending on 5th April.

      You should enter the same figure in your tax return.

      Comment


        #4
        Still a bit confused, but I think I'll go with when I received the income rather than trying to calculate the days as I've had a look at my payslips and P60 and they just use the amounts I was paid each month

        Comment


          #5
          Originally posted by knappster View Post
          Still a bit confused, but I think I'll go with when I received the income rather than trying to calculate the days as I've had a look at my payslips and P60 and they just use the amounts I was paid each month
          There are two ways that you can complete a tax return, cash or accrual.
          If you use the cash basis, you record income when it actually happens and costs when they actually occur.
          If you use the accruals basis, you record income when it's due and costs when they are incurred (the date of a repair rather than its invoice date). Costs and income are pro-rated to allocate them in the tax year.

          You can use the cash basis if you're self employed and turn over less than £150,000 per annum (there are some exceptions, but they don't apply to most landlords).
          Once you start to use the accruals basis, you pretty much have to stick with it.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            That makes sense now, thanks.

            One other question would be, if I use the cash basis then I assume that I would claim all the mortgage interest that was paid on the 1st April rather than the 5 days worth seeing as I will be declaring the full rent payment made on the 27th March?

            Comment


              #7
              Yes - you have to treat costs and income the same.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment

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