Are you a Residential Landlord?  Do you want to know what expenses you can claim to reduce your tax bill?  Then you should read this…………

As well as costs involved in repairs and maintenance being a Residential Landlord can be costly in terms of time spent on administration tasks.  Although you cannot offset your time against the rental income you receive, you can claim for replacing kitchen and bathroom equipment and fixtures and fittings.  Repairs to the building.  Membership to a landlord association.  Rubbish Removal.  All of these, subject to restrictions, can be allowable expenses for tax.

We have put together a fairly comprehensive list of the allowable expenses which may be of help, however, we suggest that you seek the advise of your accountant before making any claim to ensure that the expense fits the criteria for offset against your rental income.

For example –

When replacing items such as a shower or kitchen appliances, the replacement should be “like for like”.

Should you decide to undertaker repairs yourself, although you can’t claim for your time, you can claim the cost of any equipment you may need to hire.

Repairs and Maintenance expenses

• Replacing windows
• Roof slates/tiles, guttering
• Repairing or replacing bathroom items
• Boiler repair/replacement
• Leaking or burst pipes water/gas
• Electrical wiring repairs
• Repairs to outside walls – cracks in render/repointing brickwork
• Redecorating
• Treating damp and or condensation
• Garden and cleaning costs incurred
• Disposing of garden waste / items beyond repair or no longer needed

Between tenancy expenses

• Utility costs incurred
• Council tax costs incurred
• Advertising for new tenants

Legal and professional expenses

• Accountancy fees
• Tenancy agreements / management fees / letting agent fees
• Subscriptions to relevant associations
• Insurance costs
• Ground rents and service charges

Replacing furnishings and equipment

Landlords who rent out a furnished or part-furnished property, may be able to claim Replacement Domestic Items Relief.

Talk to us, we can help with any of the expenses that you can or cannot claim.

 Making Tax Digital for Income Tax – MTD

We keep hearing about changes to the tax system commonly referred to as MTD.

What is this all about?

How does it affect you?

The government states that Making Tax Digital is a key part of their Tax Administration Strategy. 

This will, over a period of time, apply to all businesses and landlords.  It will mean that you will be required to: –

• keep digital records
• use software that is compatible with Making Tax Digital (currently there are only 5 software houses that can offer this)
• submit updates every quarter, bringing the tax system closer to real-time information, making it similar to VAT submissions.

The most significant change that you need to be aware of right now is that from April 2024, all self-employed traders will need to prepare accounts to the new Basis Period to fit in with the Tax Year.  The existing Basis Period rules (the Current Year Basis) will be abolished and replaced with the Tax year Basis of Assessment.  This applies to all trading income that falls under Income Tax, and includes individuals with a profession or vocation; partners in a trading partnership; other unincorporated entities with trading income, such as trading trusts and estates and non-resident companies with trading income charged to Income Tax, collectively referred to as businesses.  This means that if your current year end differs to 31^st March or 5^th April, you will need to include accounts to cover the additional period to the end of the tax year for 2023/2024.

In 2023/2024, the basis period will be made up of two different sets of figures:

• A ‘standard part’ being the normal basis period (i.e. the 12 months following the end of the basis period for the 2022/2023 and 
• A ‘transition part’ running from the end of the standard part to 31^st March or 5^th April 2024. 

For example, if your current accounting period ends on 30/09/2023, then you will need to report actual figures for this period plus an estimation for the period from October 2023 to 31/03/2024 or 5^th April 2024.  The additional profits running from the end of the current year to the end of the tax year for 2023/2024 will bring the accounts into line with the new Basis Period, the new rule comes into full effect from April 2024 for the 2024/2025 Tax Year.

Steps have been introduced to reduce the impact of this change –

businesses can deduct any overlap relief, (where a change of accounting date has occurred, the new accounting date is more than 12 months from the old accounting date, and the trader has overlap profits which have yet to be offset) from the additional transitional profits and the total remaining profits can then be spread over a period of up to 5 years.

We have matters in hand for our existing clients,but if you want advice as to what you need to do, contact your accountant, if you have one, or you can contact us, to see how this impacts your business.

In the past MTD has been delayed by HMRC on a number of occasions, but this is happening now and delaying having your paperwork and accounts sorted is not an option.

The headliner for this budget was the 2p cut in National Insurance Contributions, however this is less generous than it might appear.  

Income tax and national insurance thresholds remain frozen until 2028

For some the personal tax allowance being frozen, combined with fiscal drag caused by inflation, will offset the cuts to National Insurance Contributions.  This is because more income will be subject to income tax, with more people paying tax and more people falling into higher tax bands.

The National Insurance cut was to employee contributions only, which many businesses will find disappointing.

The main rate of Class 1 employee NICs will reduce from 10% to 8% from‌‌‌ ‌‌6‌‌‌ ‌‌April 2024, and the main rate of Class 4 self-employed NICs from 6‌‌‌ April‌‌‌ 2024 to 6% from 9%.

High Income Child Benefit Charge 

The income threshold will increase from £50,000 to £60,000 from 6‌‌‌ April‌‌‌ 2024, with the taper being extended to £80,000.

This means that you won’t have to pay any of your Child Benefit back until you start earning £60,000 a year, and you’ll only lose the benefit entirely if you earn above £80,000. 

Value Added Tax (VAT) 

The VAT threshold will increase to £90,000 from 1‌‌‌ April‌‌‌ 2024, and the level at which a business can apply for de-registration will increase from £83,000 up to £88,000 

National Living Wage

The National Living wage from April 2024 will have the following changes:

Minimum wage will be:

£11.44 per hour for adults aged 21 and over (up from £10.42 per hour, for those aged 23 and over, and up from £10.18 for 21-to-22-year-olds)

£8.60 per hour for 18-to-20-year-olds (up from £7.49)

£6.40 per hour for under 18s and apprentices (up from £5.28)

You should note that you cannot claim Marriage Allowance if you’re living together but you’re not married or in a civil partnership.

 Are you eligible to apply for Marriage Allowance Transfer.

You should note that you cannot claim Marriage Allowance if you’re living together but you’re not married or in a civil partnership.

However, if you, your wife, husband or civil partner are both basic tax payers and one of you is not using your full personal tax allowance then you can transfer some of your personal allowance (up to 10%) to your partner.

This means that if one of you isn’t paying any tax because their income is below the tax allowance for the year and your wife or husband (or civil partner) is paying tax at the basic rate (20%) and you apply to transfer some of your tax allowance you will be able to receive the unused portion of their allowance against your taxable income.  If this applies to you in 2023/2024 you can backdate the claim to include any year that you were eligible since 5 April 2019.  So if you were eligible for all of the years from 2019/2020 you would receive tax relief for all four years.

If you are eligible to apply, the lowest earner must make the application.  If you are my client and you are the lower earner I can make the application for you through your self-assessment tax return.  If your partner needs to make the application, and they are not a client of mine, it can be made online, which is the quickest way to apply, however you can also apply by post.

More details about the scheme  –

Marriage Allowance Transfer allows you to transfer £1,260 of your Personal Tax Allowance to your husband, wife or civil partner.

This can reduce your tax by up to £252 in the tax year (6 April 2023 to 5 April 2024).

To benefit as a couple, you (as the lower earner) must normally have an income below your Personal Allowance – the normal allowance for 2023/2024 is £12,570.

When you transfer some of your Personal Allowance to your husband, wife or civil partner you might have to pay more tax yourself, but you could end up paying less as a couple, so still benefit from the scheme. Being in receipt of a state pension does not preclude you from applying.

You can apply for Marriage Allowance Transfer if you meet all of the following criteria:

• you’re married or in a civil partnership
• you do not pay Income Tax or your income is below your Personal Allowance (£12,570 in 2023/2024)
• your partner pays Income Tax at the basic rate, which usually means their income is between £12,571 and £50,270.

You can backdate your claim to include any tax year since 5 April 2019 that you were eligible for Marriage Allowance Transfer.

Your partner’s tax bill will be reduced depending on the Personal Allowance rate for the years you’re backdating.

In order to make the application you need both your National Insurance Number and that of your wife, husband or civil partner.

The quickest way to apply for Marriage Allowance is online –

https://www.gov.uk/apply-marriage-allowance

You can write to HMRC at this address –

Pay As You Earn and Self Assessment
HM Revenue and Customs
BX9 1AS
United Kingdom

Full information can be found on the HMRC website

Marriage Allowance – GOV.UK (www.gov.uk)

If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.

You cannot get Marriage Allowance and Married Couple’s Allowance at the same time.

If you have any questions we should be pleased to hear from you – call us on 07531741287 or drop an e-mail to info@synergyaccounting.co.uk