Traditional accounting or Cash Basis ....

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Traditional accounting or Cash Basis ....

    I have a Self Assessment to fill. In the section where they ask about Traditional Accounting or Cash Basis Which one shall I choose.

    I have one Studio flat BTL for which I receive rent and expenses earning below £150k of course. I also have a job.

    1) What option to choose here?

    2) What factors consider for my choice?

    3) Whether it is a matter of legal requirement to choose the right one?

    I am confused because I have heard/read that if one accept advance rent payment that also goes on to the next financial year then under cash basis you cant spread it to next tax year to lower the tax liability. In tis case am I ok to choose traditional accounting every year.

    If there are any other factors tips I need to be aware of please help me choose.

    #2
    I expect your SATR tax return covers one year period from 6 April 2019 to 5 April 2020 for 12 months rental income and expenses .

    You should have kept records showing date when you received rent and when you paid expenses..
    Traditional or cash is a tricky question ? If you received a bill in mid March , it is reported in this year's tax return ( traditional) or if you paid the bill 6 April or later , it falls into in next year's return ( cash ) . So better to choose traditional.

    Best to make sure you have included rental income and expense bills for 12 months.

    Comment


      #3
      Thanks Gordon,

      I do keep records and as all the payments bar one go via the bank its easy to see/keep records. Luckily any advance payments made have been within the year of the financial years including the rent on 13th Mar.

      Last year(2018-2019) I received rent a month in advance ie for period of 3rd Apr to 2nd May what should have I done for this. I chose Traditional. But didn't spread it to next financial year. Was that still ok.

      Comment


        #4
        If you chose traditional you should have put it in 19/20.

        Comment


          #5
          If you are paid rent in advance and the period extends into next financial year, I would apportion the rent after 5 April and enter the part sum in next year's account.

          Comment


            #6
            So if I am choosing Traditional and get paid say £100 on 3rd of Apr rent in advance then I could split it. For eg say rent is £100pcm paid on 3rd Apr then £100x12 / 365 = £3.28 x 3(3rd, 4th and 5th apr) = £9.86 for current financial year and £3.28 x 27 = £88.56 in to the next financial year.

            How about any expense like insurance or ground rent to the free holder. If I pay that in advance on the 1st of Apr am I supposed to spread that.

            If I left it in the current financial year is that ok as well, or is there a law stipulating I need to spread it appropriately. IE I am not going to be penalised for not doing so.


            Correct me if I am wrong with my statement below.

            I suppose which ever I choose I end up paying the same tax if nothing else changed in my situation.

            Comment


              #7
              I believe you have to ensure there is one annual insurance bill in the annual expense.

              If you paid insurance bill "in advance" ( say - due date on 1st April) , you have to treat it as covering from 1st April to next Mar 31st.

              So for the tax year 2019-2020, you would include insurance bill, due at 1st April 2019 .

              The insurance bill due at 1st April 2020 will be reported in Tax Return ( 2020-2021 ) .

              Comment


                #8
                Originally posted by Gordon999 View Post
                I believe you have to ensure there is one annual insurance bill in the annual expense.

                .
                Thanks.
                Personal circumstances prevents me to pay lump sum for now. I used to, then things changed. I will keep the advice payments in mind for the future.

                Comment


                  #9
                  I prefer cash basis as I do it myself and not want to spend time splitting bills between tax years. In the end the tax will be the same I think.

                  Comment

                  Latest Activity

                  Collapse

                  • Reply to Let to buy and tax deductions
                    by jpkeates
                    Sorry didn't see it was a holiday let,
                    I don't know the answer in that case....
                    07-03-2021, 18:52 PM
                  • Let to buy and tax deductions
                    by mlod42
                    I own my house and am thinking of either buying another house for holiday letting or doing a let to buy - remortgaging my house onto a holiday let mortgage and buying a different house to live in myself.

                    If I continue to live where I am, I understand that if I increase my residential mortgage...
                    07-03-2021, 11:49 AM
                  • Reply to Let to buy and tax deductions
                    by mlod42
                    Oh I see. Does that definitely apply to holiday lets too where the tax rules are more favourable than for normal lets?...
                    07-03-2021, 18:48 PM
                  • Reply to Let to buy and tax deductions
                    by jpkeates
                    You can't claim the cost of new furnishings (which includes white goods) like you can for replacements.
                    07-03-2021, 18:41 PM
                  • Reply to Let to buy and tax deductions
                    by mlod42
                    Also I suppose if I left things like my TV and washing machine at my current house and bought new ones at my new house if I did let to buy then I couldn't tax deduct the new ones so it might be worth moving them to the new place and buying new ones for my original house? It seems crazy if this is necessary...
                    07-03-2021, 15:08 PM
                  • Reply to CORPORATION TAX Re: BUDGET 2021
                    by jpkeates
                    That would be unfortunate.
                    It wasn't included in any of the government documents I have read about the budget, where does this information come from?...
                    07-03-2021, 09:16 AM
                  • CORPORATION TAX Re: BUDGET 2021
                    by Pradip
                    Are you aware that any landlord that has 1 or more properties in a company, (investment company) regardless of the profit level, will have to pay corporation tax @25% from 2023.

                    The new limits and 19% rate only apply to TRADING COMPANIES and not INVESTMENT COMPANIES.

                    Is this...
                    06-03-2021, 23:04 PM
                  • Reply to Accountant
                    by Gordon999
                    If you don't require face to face meeting with accountant and have only one BTL property , you could use an online company such as twd for self assessment . ( I have no connection with this company and not making any recommendation ).

                    https://twdaccounts.co.uk/services/self-assessment...
                    07-03-2021, 05:05 AM
                  • Accountant
                    by Bridge2020
                    Any ideas how much an accountant would charge to do my self assessment ?
                    04-03-2021, 10:25 AM
                  • Reply to CORPORATION TAX Re: BUDGET 2021
                    by Gordon999
                    Corporation tax is set to rise to 25% in April 2023, up from the current rate of 19%.

                    Rishi Sunak announced in the Budget that companies with profits of £50,000 or less would remain at the current rate of 19%.

                    There would then be a taper for firms earning above £50,000, with...
                    07-03-2021, 04:57 AM
                  Working...
                  X