would you share your tax tips

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    would you share your tax tips

    Hi I am relatively new to btl please go easy on me! My wife and I own a property and are about to fill in our first self assessment. I am in the higher tax bracket, my wife the lower. We will be filling in a SA each which seems a real pity given I will pay more. We are not doing brilliantly with our property but will eventually look to make £200 a month after mortgage interest and flat service charge deductions so £2400 a year. This is £1200 a month profit a year each which for the effort we have put in seems a waste of time and we feel dejected that I will lose 40% of my share to the taxman. I have come here to ask for help and advice on how I can limit this loss. I know I can claim 10% wear and tear allowance and small costs like petrol use and stationary etc but what other tips can people disclose to me to have made our efforts worthwhile? The tax deductables on hmrc website seem small fixed values yet people tell me there is a lot that can be done to reduce the tax bill. But what? Apparently I can ignore the fixed home office fee and use a proportion of my house as an office allowing me to use the mortgage interest payments of my home (which are huge). Is this true and if so is this the real secret? Also can life insurance payments be used?
    thank you for any help that reduces my sense of feeling quite demoralised
    james

    #2
    Sorry there is a typo. I have said we will make a before tax profit of £1200 each. I meant to say this will be an ANNUAL before tax profit of £1200 each. Not monthly (I wish!!)

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      #3
      Do the decent patriotic thing and pay all due taxes promptly & cheerfully!
      I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

      Comment


        #4
        Yes im looking to fairly minimise the tax which I think most people legally do. So looking to see if anyone on this site would be nice and help. Ive heard of apportionment. A book by tax cafe says u can use Interest mortgage payments from your home in proportion with using a room in your house as an office to do this but I read it thst hmrc says you can't. So hard to know what to believe

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          #5
          Can no one advise or want to disclose any tips?

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            #6
            Originally posted by jt2007 View Post
            Can no one advise or want to disclose any tips?
            a good tip : pay for advice from a qualified accountant. All smaller firms have loads of clients like you and will know what will wash. Counter-intuitively you may find that coughing up a reasonable amount of tax saves you agg in the long run. The tax man does not like clever dicks.

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              #7
              Originally posted by jt2007 View Post
              I am in the higher tax bracket, my wife the lower. We will be filling in a SA each which seems a real pity given I will pay more.
              I agree with the advice to talk to an accountant, but I would say you need to organise things so that your wife receives and declares the lion's share of the income, so the tax is being paid at her lower rate, rather than 50:50. I've always thought that you needed to do this by transferring the ownership of the property pro-rata, but I think others here reckon that's not necessary.

              Originally posted by jt2007 View Post
              Apparently I can ignore the fixed home office fee and use a proportion of my house as an office allowing me to use the mortgage interest payments of my home (which are huge).
              What is this 'fixed home office fee"? Never heard of that. Yes, you can probably offset a proportion of your home running costs (fuel bills, council tax, probably mortgage interest); however you could only do so at a realistic amount relative to your business. And if your home office represents, say, 10% of the total area of your home, than that puts a ceiling on the amount you can claim. If your office isn't exclusively for business use, then that knocks it down again. You'd have other potential issues - council tax (running a business from home), you might even run into capital gains tax issues with HMRC when you sell your home, as it won't have been exclusively a home.

              Whatever, it certainly isn't the 'magic bullet' for reducing your tax bill that you seem to think.

              Comment


                #8
                Has the property ever been your or your wife's main residence?

                You will need to transfer some/all of your share to your wife, if you want to reduce Income Tax. There have been many posts on the subject.

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                  #9
                  The fixed home as your office fee is 208 a year I believe. I dont know all the correct terms sorry. But with the interest on my house mortgage being 850 a month then I may be able to make better use of the area of my office and the time it is used for. It may work out more than 208...no magic bullet but a potentially better scenario.

                  now the 50-50 split. I have read a lot of past posts on this and no one seems to agree whether an official form is needed or not. I took advice from you last night and spoke to an accountant and said NO official deed is needed.
                  He gave me this quote....

                  Comment


                    #10
                    question it. It says that "joint owners can agree a different division of profits and losses and so occasionally the share of profits or losses will be different from the share in the property. The share for tax purposes must be the same as actually agreed" i.e you need to have a signed agreement between you both - doesn't need to be legally drawn up, just an informal document between the two of you.

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                      #11
                      Sorry my comments came off as different posts then. But the quote implies no official documentis needed. As I say this seems to be cconstantly debated so is the accountant correct that nothing official is needed and I can put all profits in my wifes name?

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                        #12
                        Oh and yes king maker we lived there for three years before we moved and married

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                          #13
                          Originally posted by jt2007 View Post
                          Sorry my comments came off as different posts then. But the quote implies no official documentis needed. As I say this seems to be cconstantly debated so is the accountant correct that nothing official is needed and I can put all profits in my wifes name?
                          Yup, transfer property to wife 100% and no probs.. (albeit maybe CGT to pay.. and IHT issues & issues of trust between partners, some might query patriotism cf actions...) - but I'd write to HMRC to explain ...

                          Anything less than
                          all profits in my wifes name
                          would need different approach.

                          Cheers!
                          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                          Comment


                            #14
                            I guess tbis is where form 17 is needed to vary the 50. 50 split. Am I right? I guess the consequences of varying. this split wothout form 17 are quite big. May I ask does form 17 legally change the ownership of the property then? Ie if we changed the benefit of the rental income to 99-1 that means that technically one person owns 99% of the property?

                            Comment


                              #15
                              Originally posted by jt2007 View Post
                              question it. It says that "joint owners can agree a different division of profits and losses and so occasionally the share of profits or losses will be different from the share in the property. The share for tax purposes must be the same as actually agreed" i.e you need to have a signed agreement between you both - doesn't need to be legally drawn up, just an informal document between the two of you.
                              The above is an extract from section 1030 of HMRC's Property Income Manual. Unfortunately, it is not applicable to joint owners who are husband & wife (or Civil Partners) - only unmarried owners. You need to read further down the page.

                              The accountant you spoke to is wrong. A DoT is required for an uneven split. And a Form 17 needs to filed with HMRC within 60 days, if the property is in joint legal names.

                              Originally posted by jt2007 View Post
                              Oh and yes king maker we lived there for three years before we moved and married
                              So both of you have owned it and lived in for the same length of time?

                              Originally posted by jt2007 View Post
                              I guess tbis is where form 17 is needed to vary the 50. 50 split. Am I right? I guess the consequences of varying. this split wothout form 17 are quite big. May I ask does form 17 legally change the ownership of the property then? Ie if we changed the benefit of the rental income to 99-1 that means that technically one person owns 99% of the property?
                              It is the other way round - the split of the rental profit follows on from the split of the (beneficial) ownership of the property.

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