CGT and tax returns

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

    CGT and tax returns

    Hello all, just need some advice re CGT. I have a house which I refurbished entirely, mostly in this financial year and I could start my tax returns on the 6th of April 2021. I spent nearly £30000. New kitchen and bathroom, re doing the garden, new flooring throughout ,total electrical re wire, re decoration etc. There is now a new tenant in place, I may sell the property, but it won’t be for another 5 years. I need some guidance on what I should offset against my 2020/2021 HMRC bill, and what I should eventually offset against CGT, to minimise overall tax. I have already put the electrical work down as an expense on my 2019/2020 bill as that work fell during that time period. Have not put anything else down. Can anyone offer any advice, or point me towards a good source of advice? Thanks in advance.

    #2
    Was the property your first and was this the first ever tenancy, or was the property already part of your business?

    Essentially the capital items are things that materially increased the value of the property, like adding a new room or replacing something that had caused the original purchase price to be lower than it would otherwise have been.
    There's an element of improvement allowed because a new more modern anything is usually better than what was there.

    So, from your description, most of the things are likely to be operational costs rather than capital items.
    Unless the "new" bathroom and kitchen are actually completely new to the property.
    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


      #3
      Thanks jpkeates. I have two rentals and this is not the first tenant, there were tenants in situ previously and their moving out was the opportunity ( and need) for a total refurb. Obviously there was a kitchen nanny bathroom before, but the new ones are improvements. I owned both the properties simultaneously when I inherited the, from my late father. Sounds like I should put most items down as allowable expenses for this tax year then?

      Comment


        #4
        Lots on Yes, sounds like it.
        It's a bit of an art, rather than a science.

        You can also apportion the costs between the two categories.
        If you, for example, think that the result is that the property is worth about £10k more after the work has been done, you can decide that a third of the costs were capital and the rest was operational.

        Keep your records for when you sell the property if you do keep some of the costs as capital.
        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


          #5
          Thank you JP. There’s obviously a few things to bear in mind, the temptation of course is to put it all down as expenses and get a nice big fat reduction in the self assessed tax bill for this financial year. NRLA do a half day course on CGT which I should probably do. I think the property is probably worth at least £10000 more than it was pre renovation.

          Comment


            #6
            I believe you can include cost for buildings insurance , council tax for vacant period , rewiring , flooring , redecoration + gardening as operating expense against the rental income in your tax return for 2020-2021. The cost for new kitchen and new bathroom suite may be capital cost and saved for claim after future sale

            Comment


              #7
              Thanks everyone. I’m going to ring HMRC and ask. Last time I did that I was eventually put through to someone who was quite knowledgeable and competent. If that doesn’t work, the NRLA does a tax for landlords course in June, I might do that.

              Comment


                #8
                I'd personally suggest never asking HMRC for advice on tax.
                They're not qualified to give it and are working for an organisation that has targets for collecting tax.
                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


                  #9
                  Oh dear. Maybe the NRLA course then. Please don’t tell me that’s a bad idea!

                  Comment


                    #10
                    Originally posted by Lots on View Post
                    Oh dear. Maybe the NRLA course then. Please don’t tell me that’s a bad idea!
                    No idea, I've never interacted with the NRLA - but no reason to think that would be a bad idea.

                    I'd involve an accountant personally.
                    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


                      #11
                      Ok, I’ve have never used an account in my life. How do you find a competent one and how much would it cost ( no point doing it if it costs as much as any savings?).

                      Comment


                        #12
                        Sorry about all the typos.

                        Comment


                          #13
                          I found a good accountant by looking for a local firm with offices (above a high street is a usual location) and sending an online enquiry from their web site.
                          The lack of response ruled most of them out straight away.
                          Met with two of them, like one more than the other and have used them since.

                          It's not cheap (the actual cost will vary depending on where you are) and any savings are hard to quantify. I've saved a couple of small amounts, which add up year on year, but are nowhere near the cost of the returns (one for me, one for my wife and one for a trust).

                          But each year (except last year) I spend 20 minutes reviewing my finances with them, and this gives me confidence I'm not missing anything. And a couple of times we've had some serious reviews about how the property is owned and whether it's worthwhile restructuring.

                          So it's worth it for me, but might not be for anyone else.
                          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


                            #14
                            I should add that I have had quite a lot of experience of business finance and tax from my work, so there wasn't expecting there to be too much that I'd missed in my planning.
                            The less you know about tax and accounting the more likely you are to have missed some benefits I'd have thought.
                            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


                              #15
                              Thank you JP. I am not involved in finance in my job ( I work for the nhs as a clinician) and what I know I have picked up as I go along, so it is definitely something to consider. A one off consultation might be the way forward, to help with tax returns and minimise CGT.

                              Comment

                              Latest Activity

                              Collapse

                              • Recent tax return
                                by Ailers
                                Hi, new here, sorry if this has been asked already but I can't find the answer.

                                I have just completed my tax return for 2020/21 as a landlord with a few properties. My income was 22k and my outgoings (maintainance, ground rent, insurance, mortgage payments etc) was 18k. The mortgages are...
                                24-01-2022, 22:42 PM
                              • Reply to Recent tax return
                                by jpkeates
                                I suspect that you completed the return incorrectly.
                                25-01-2022, 09:30 AM
                              • Reply to 50/50 ownership versus rental split
                                by AndrewDod
                                Yes (if you are spouses)
                                Probably wise to use a lawyer
                                CGT not relevant as you can freely transfer between spouses for CGT purposes (even shortly before a sale)...
                                25-01-2022, 08:52 AM
                              • 50/50 ownership versus rental split
                                by Deeks67
                                Hi guys , I have recieved some inaccuratre advice ( not from this site ) RE ownership and rental income split . my wife and I have 2 unemcumbered properties which are renting out , the first started renting in Oct 2020 and the second started in July 2021 . Both properties are in joint names 50/50 (...
                                25-01-2022, 06:24 AM
                              • Reply to Tax return
                                by jpkeates
                                If it was first let in December 2020, the costs allowable against income prior to that take place on the first day of the first tenancy for tax purposes.

                                So, if you mean can you claim it on a tax return for April 2020 to April 2021, the answer is yes.
                                You can't claim it for this tax...
                                24-01-2022, 21:10 PM
                              • Tax return
                                by pchaure
                                Hi
                                New to this, buy to let property got in 2018 but renewing took time and COVID hit. Rented out since Dec 2020. I had Electrical work done completed in 2019, as had no income I had not filled in self assessment. Can I claim it in this tax year?
                                24-01-2022, 19:05 PM
                              • Reply to Advice
                                by SouthernDave
                                I started my limited company a year before buying the first property, then bought a second 2 months later, a third 3 months after that, a fourth 5 months after that and so on to where I am now. Our lenders have never said they want a separate company per property. Ive never heard of that, if it were...
                                23-01-2022, 17:40 PM
                              • Advice
                                by jhoggard
                                Hi,

                                I currently have a property rented out in my own name with a fair bit of equity around 50% LTV this is actually a repayment mortgage which i'm looking to switchover to a interest only. When i do this i'm also taking money out of the property to put towards another which i'm looking...
                                20-01-2022, 14:25 PM
                              • Reply to Advice
                                by jpkeates
                                I don't think we disagree.

                                The OP has one property and is looking to buy a second.
                                At that point in that business, lenders will want a company per property.

                                There's a point where that ceases to be the case, when the portfolio gets big enough, or, presumably when someone...
                                23-01-2022, 17:34 PM
                              • Reply to Advice
                                by SouthernDave
                                i concur with James, once you get over 4 properties, they consider you to be a portfolio landlord and want to start seeing cashflow forecasts before lending to make sure the company is buoyant. Directors guarantees each time but no limits on number of properties or number of dofferent lenders.
                                23-01-2022, 16:50 PM
                              Working...
                              X