Tax bill

[lochaber_lass]

Sorry in advance for the long post......


(1) Can anyone advise me if my understanding of Tax legislation is correct and whether I have calculated my Tax liability properly?

(I have purposely only included rent and mortgage amounts)

Annual rent = £21,600

Annual mortgage payments = £8,526

Pre-tax profit = £13,074



Personal allowance £5,035 (I am not employed)

Wear & tear allowance = £2,160

Total allowances = £7,195



Profit liable for tax = Pre-tax profit – Total allowances = £13,074 - £7,195 = £5,879

First £2,150 taxed @ 10% = £215
Next £3,729 taxed @ 22% = £820.38

Total annual tax due = £1,035.38

(2) Am I correct to say that self-assessment for year April 2006 to April 2007 can be submitted as late as September 2007?

(3) Am I also correct to say that the tax for the above does not need to be paid until January 2008?

(4) Can buildings-insurance premiums be offset against tax?

(5) One of the properties is a flat which attracts a grounds-maintenance charge and a service-charge for electricity/cleaning of the common stairway. Can these also be offset against tax?

(6)
<a> I live some distance from the properties, so can I offest any travel expenses in order to visit the properties?

<b> If so, what would be an acceptable number of visits per annum?

(7) Is there anything else that can be offset against tax?


I know this is a lot to throw at you, but confirmation/correction of the above would be much appreciated.

Thanks.

[Tax Accountant]

Sorry in advance for the long post......


(1) Can anyone advise me if my understanding of Tax legislation is correct and whether I have calculated my Tax liability properly?

(I have purposely only included rent and mortgage amounts)

Annual rent = £21,600

Annual mortgage payments = £8,526

Pre-tax profit = £13,074



Personal allowance £5,035 (I am not employed)

Wear & tear allowance = £2,160

Wear & Tear Allowance is actually an expense of your lettings business.

Total allowances = £7,195



Profit liable for tax = Pre-tax profit – Total allowances = £13,074 - £7,195 = £5,879

First £2,150 taxed @ 10% = £215
Next £3,729 taxed @ 22% = £820.38

Total annual tax due = £1,035.38

Assuming you do not have other income which may take you into higher rate bracket.

(2) Am I correct to say that self-assessment for year April 2006 to April 2007 can be submitted as late as September 2007?

You need to notify your new source of income within the required time limits.

Subject to this, tax return could be submitted by the 31st January following the end of the tax year. Therefore, 2006-07 return could be submitted by 31 January 2008.

30 September 2007 applies if you want the tax office to do your tax calculations in good time for the tax payment due date of 31 January 2008.

(3) Am I also correct to say that the tax for the above does not need to be paid until January 2008?

In the first year, yes. Thereafter, you are normally required to make payments on account on 31 January within the tax year and 31 July following the end of the tax year. Any balancing payment is due on 31 January following the end of the tax year. In an ongoing situation for the tax year 2006-07, you would have made payments on account on 31 January 2007 and 31 July 2007 to cover tax equal to the amout due for the previous tax year 2005-06. Any balancing payment would be due on 312 January 2008 at which date you would also need to make the 1st payment on account of the tax due for the year 2007-08.

(4) Can buildings-insurance premiums be offset against tax?

Yes, against profits, not against tax.

(5) One of the properties is a flat which attracts a grounds-maintenance charge and a service-charge for electricity/cleaning of the common stairway. Can these also be offset against tax?

Yes, against profits, not against tax.

(6)
<a> I live some distance from the properties, so can I offest any travel expenses in order to visit the properties?

Yes.

<b> If so, what would be an acceptable number of visits per annum?

Whatever it takes.

(7) Is there anything else that can be offset against tax?

Whatever expenses you have actually incurred wholly and exclusively incurred in respect of the let property so long as it is not a capital expenditure.

I know this is a lot to throw at you, but confirmation/correction of the above would be much appreciated.

Thanks.

See replies above in red.

Ramnik

[lochaber_lass]

Ramnik, thank you.....

Ramnik,
thanks very much for the quick response.

Did I actually arrive at the correct figure for Total Annual Tax due = £1,035.38????


When you say"You need to notify your new source of income within the required time limits". what are the limits? I am about to purchase another property, so if I were to have it let (and therefore generating income) by, say, 1st May 2007, when do I have to declare this additional income?

Can legal fees for finding & vetting tenants and drawing up tenancy agreements can be offset against tax?

If I ever had to take legal action to have a tenant evicted, could I offset those costs against tax also?

[Tax Accountant]

Ramnik, thanks very much for the quick response.

Did I actually arrive at the correct figure for Total Annual Tax due = £1,035.38????

£5,035 personal allowances is for 2005-06 and £2,150 starting rate of 10% is for the tax year 2006-07. Otherwise appears OK.

When you say "You need to notify your new source of income within the required time limits", what are the limits?

I am about to purchase another property, so if I were to have it let (and therefore generating income) by, say, 1st May 2007, when do I have to declare this additional income?

If you are already declaring the rental income foe one property, you do not need to notify any subsequent additions.

Can legal fees for finding & vetting tenants and drawing up tenancy agreements can be offset against tax?

yes

If I ever had to take legal action to have a tenant evicted, could I offset those costs against tax also?

Yes

See answers in red above.

Ramnik