Adrian Mooy & Co - Accountants Derby

Adrian Mooy & Co

Welcome to our home page. We are a firm of Chartered Certified Accountants and tax advisors in Derby. We help businesses like yours grow and be more profitable.  For a friendly service covering audit, tax, accounts, self assessment, VAT & payroll please contact us.

 

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Accountants Derby

Contractors - Best Salary & Dividends

2018/19

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Autumn Budget 2018

Let Property Campaign

Autumn Budget 2017

Tax Efficient Profit Extraction

○  Quality checked firm - awarded the prestigious ACCA Quality Checked mark

○  Cloud-based accounting solutions

○  Tax solutions to help you keep more of your income

○  Transparent affordable pricing

○  Free initial interview

We offer a traditional personal service and welcome new clients.

From start-up to exit and everything in-between - whether you’re  struggling with company formation, bookkeeping, or annual accounts and taxation, you can count on us at every step of  your business’s journey.

We also offer cloud-based accounting solutions. With the power of cloud accounting in your hands, you can access accurate real-time data on the go, accept instant payments and even automate repetitive tasks like invoicing. Fast, easy, touch-of-a-button accounting is the future.

If you are looking for a Derby accountant then please contact us.

 

Off-payroll - public sector

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Tax Planning for individuals

Tax Planning for Individuals

Successful individual tax planning requires careful attention across a wide range of areas and time frames.

Tax Planning for small business

Tax Planning for Small Business

Effective tax-saving strategies for small businesses operating in a tough economic climate.

Contractors and Freelancers

Contractors & Freelancers

Invoicing your contracting work through a limited company is highly tax efficient.

  • Here are some tips for saving your company corporation tax and extracting money from your company tax efficiently. Why pay more than you need to? Company owners - Saving tax

  • The approach of a company’s year end is an important time to look at tax saving. Action has to be taken by that date, otherwise the opportunities could be lost. Company tax saving

Services

We offer a range of high quality services

Web-based accounting

Xero is a web-based accounting system designed with the needs of small business owners in mind.

 

It can automatically connect to your bank and download your bank statements. From there it’s simple to tell Xero what transactions relate to and once told it remembers and looks out for similar transactions. This saves time and makes keeping your accounts up to date easier.

 

Log in from any web browser. As your accountant we can log in and provide help.

Our process for delivering tax accounting vat self assessment and payroll services

 

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Our Process

Understand your needs

Firstly we listen and gain an understanding of your business and what you are aiming to achieve.

Continuous improvement

We seek your opinions on the service we provide and respond to feedback in order to upgrade and improve what we do.

Build a relationship

Success in business is based around relationships and trust. Our objective is to develop and build strong relationships with our clients, based on two way trust and respect.

Confirm your expectations

Our aim is  to help you maximise your business potential and we tailor our service to meet your requirements and agree a timetable for delivering them.

Actively communicate

Communication is important to the success of any commercial venture. It is therefore a vital part of our work with you, sharing the knowledge and ideas that help you to realise your ambitions.

Our Process

Understand your needs

Confirm your expectations

Actively communicate

Build a relationship

Continuous improvement

Straightforward and easy to deal with Adrian Mooy & Co provide an efficient, friendly and professional service - payroll, tax returns, annual accounts and VAT returns are always done on time.    Eddie Morris

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Testimonials

First class! Super accountant! We have been with Adrian Mooy & Co since 1994. They provide a prompt, accurate & reliable service. There is always someone at the end of the phone to help and advise us. They have always delivered and we are more than happy to recommend them.    Ian Cannon

Helpsheets

Business expenses

Being savvy with your expenses is a large part of running a successful business, regardless of its size. Claiming expenses is a simple way to keep your business tax efficient – it reduces your profit, which in turn reduces your tax payments. By claiming every allowable expense you’re making sure you don’t pay a penny more in tax than you have to.

 

For more information about exactly what expenses you can claim, see our helpsheets.

  • Lettings relief – benefit from it while you can

    Lettings relief is a potentially valuable relief that is available to those who let out a property which has at some point been their only or main residence. However, the opportunity to benefit from the relief in its current form may be time limited – the Chancellor announced at the time of the 2018 Budget that the relief is to be curtailed from April 2020. From that date, it will apply only where the owner of the property is in shared occupancy with the tenant. The Government are to consult on the details.

    Nature of the relief

    Under the rules as they currently apply, lettings relief is available where a gain arises on the disposal of a property which

    • at some time has been the individual’s only or main residence;

    • during the period of ownership, all or part of the property has been let as residential accommodation; and

    • a chargeable gains arises as a result of the letting.

    The amount of the relief is the lowest of the following three amounts:

    1. the amount of private residence relief;

    2. £40,000; and

    3. the amount of the chargeable gain arising as a result of the letting.

    Example

    Tom owned his flat for 5 years, realising a gain on sale of £200,000. He lived in it as his main residence for the first two years and let it out for the last three.

    The first two years qualify for private residence relief, as does the last 18 months, which benefits from the final period exemption. Private residence relief is therefore £140,000 (3.5/5 x £200,000).

    The remainder of the gain (£60,000) is attributable to the letting.

    Lettings relief is the lower of:

    1. £140,000 (the amount of private residence relief);

    2. £40,000; and

    3. £60,000 (the amount attributable to the letting).

    Tom claims lettings relief of £40,000. As a result, only £20,000 of the gain is taxable (£140,000 being sheltered by private residence relief and £40,000 by lettings relief).

    Planning ahead

    All that is known so far is that lettings relief is to be curtailed from 6 April 2020. From the same date, the final period exemption is to be halved to nine months; this will impact on the private residence relief available.

    If a disposal of a property currently qualifying for lettings relief is on the cards, it may be beneficial to sell before 6 April 2020 rather than afterwards.

  • Paying mileage allowances tax-free

    Employees are often required to make business journeys, either in their own or a company car. Most employers meet the cost of the fuel for business journeys, and it is possible to do this without triggering a tax liability.

    Employees with a company car - Where an employee has a company car and meets the cost of fuel for private journeys, the employer can meet the cost tax-free as long as the payments made to the employee do not exceed the advisory fuel rates published by HMRC. These are updated quarterly.

    Engine size                          Petrol .                                       LPG

    1400cc or less                      12 pence per mile                       8 pence per mile

    1401 to 2000cc                     15 pence per mile                      10 pence per mile

    Over 2000cc                          22 pence per mile                     15 pence per mile

    Engine size                          Diesel

    1600cc or less                       10 pence per mile

    1601cc to 2000cc                  12 pence per mile

    Over 2000cc                          14 pence per mile

    Although electricity is not regarded as a fuel for car fuel benefit purposes, an advisory electricity rate of 4 pence per mile was introduced from 1 September 2018.

    If the employer pays more than the advisory rate the profits element is taxable and liable to Class 1 (employer and employee National Insurance contributions).

    Example - In November 2018 Mark drives 260 business miles in his company car and claims a mileage allowance from his employer. Mark’s car is a petrol car with a 1600cc engine. As long as his employer does not pay more than 15 pence per mile, the payments are tax and NIC-free.

    Employee’s own car - Where the employee uses their own car for business different, higher rates apply. These reflect the costs of insurance, servicing, depreciation, etc. which are borne by the employer when an employee has a company car.

    Mileage payments are tax-free if the amount paid does not exceed the approved amount. This is simply the number of business miles for the year multiplied by appropriate approved mileage rate. The rates are shown in the table below.

    Cars and vans          45p per mile for first 10,000 business miles in tax year

                                     25p per miles for subsequent business mile

    Motorbikes               24p per mile

    Bicycles .                 20p per mile

    Example - Sarah drives 12,700 business miles in her own car in the tax year in question.

    The approved amount is £5,175 ((10,000 miles @ 45p) + (2,700 miles @ 25p)).

    As long the payments made to Sarah do not exceed £5,175, they are tax free.

    For National Insurance purposes, the 45p rate for cars and vans is used for all business miles in the tax year, not just the first 10,000. In the above example, a mileage payment of up to £5,715 would be NIC-free (although anything over £5,175 would be taxable).

    If the amount paid exceeds the approved amount, the excess must be reported to HMRC on the employee’s P11D or payrolled. If the employer pays less than the approved amount (or does not pay), the employee can claim tax relief for approved amount less anything paid by the employer.

    The employer can also pay a tax-free passenger payment of 5p per mile for each passenger also making a business journey. This may encourage car-sharing.

    As long as the payments do not exceed HMRC’s rates, they can be paid tax-free.

  • Pass on your house free of IHT

    The introduction of the residence nil rate band (RNRB) opens up the possibility of leaving the family home to successive generations without triggering an inheritance tax charge. It is available for deaths on or after 6 April 2017. The RNRB is an additional nil rate band that is available where a qualifying residence is passed on death to a direct descendant. The RNRB is:

    • £100,000 for 2017/18

    • £125,000 for 2018/19

    • £150,000 for 2019/20

    • £175,000 for 2020/21

    From 2021/22 onwards it will be increased each year in line with the CPI.

    Estates worth more than £2 million - Where the net value of the estate is more than £2 million, the RNRB is reduced at a rate of £1 for every £2 by which the value of the estate exceeds £2 million. Thus, for 2018/19, the RNRB is not available where the net estate exceeds £2,350,000.

    Interaction with existing nil rate band - The RNRB is available in addition to the normal nil rate band of £325,000. However, it can only shelter a residence that is passed on death to a direct descendant. The value of the RNRB is capped at the net value of the residential property (i.e. after deducting liabilities such as a mortgage) left to direct descendants where this is less than the maximum for the year, as set out above.

    Transfer to spouse - The spouses’ exemption allows property to be left to a spouse or civil partner without triggering an inheritance tax charge. However, to ensure that the nil rate band is not lost, the proportion unused on the death of the first spouse or civil partner may be used transferred to the surviving spouse or civil partner and used on their death. The RNRB band operates in the same way and any unused proportion is transferred to the surviving spouse or civil partner.

    The transfer is available even if the first death was prior to 6 April 2017 as long as the surviving spouse or civil partner dies after that date.

    Qualifying residence - The RNRB only applies where the residence that is passed on is a qualifying residence. This must be a residential property – a property such as a buy-to-let property in which the deceased has never lived does not qualify. Where there is more than one qualifying residence, the personal representative can nominate which one qualifies.

    Direct descendent - The RNRB is only available if the residence is left to a direct descendant. This includes a child and their lineal descendants.

    Downsizing - Where the deceased downsized after 8 July 2015 or ceased to own a residence after that date, the funds relating to the former residence can still qualify for the RNRB if passed to a direct descendant.

    Example - Ida and Edward have lived in their family home for many years. On her death in 2015, Ida left her whole estate to Edward. On his death in June 2018, he left his estate worth £850,000 equally between his two sons. The estate included the family home with a net value of £600,000.

    Edward’s estate benefits from the nil rate band of £325,000 and 100% of Ida’s nil rate band – a further £325,000.

    He is also able to benefit from the RNRB (£125,000), plus 100% of Ida’s RNRB (a further £125,000) as he leaves a qualifying residence to direct descendants. As the net value of the residence is worth more than £250,000, the available RNRB is £250,000.

    Edward’s total nil rate band (including the RNRB) is £900,000 ((2 x £325,000) + (2 x £125,000)). As the value of his estate is less than this, it is free from inheritance tax.

  • Making Tax Digital for VAT – what records must be kept digitally

    Making Tax Digital (MTD) for VAT starts from 1 April 2019. VAT-registered businesses whose turnover is above the VAT registration threshold of £85,000 will be required to comply with MTD for VAT from the start of their first VAT accounting period to begin on or after 1 April 2019.

    Digital record-keeping obligations

    Under MTD for VAT, businesses will be required to keep digital records and to file their VAT returns using functional compatible software. The following records must be kept digitally.

    Designatory data - Business name - Address of the principal place of business - VAT registration number - A record of any VAT schemes used (such as the flat rate scheme)

    Supplies made - for each supply made: - Date of supply - Value of the supply - Rate of VAT charged

    Outputs value for the VAT period split between standard rate, reduced rate, zero rate and outside the scope supplies must also be recorded.

    Multiple supplies made at the same time do not need to be recorded separately – record the total value of supplies on each invoice that has the same time of supply and rate of VAT charged.

    Supplies received - for each supply received: - The date of supply - The value of the supply, including any VAT that cannot be reclaimed - The amount of input VAT to be reclaimed.

    If there is more than one supply on the invoice, it is sufficient just to record the invoice totals.

    Digital VAT account

    The VAT account links the business records and the VAT return. The VAT account must be maintained digitally, and the following information should be recorded digitally:

    1. The output tax owed on sales.
    2. The output tax owed on acquisitions from other EU member states.
    3. The tax that must be paid on behalf of suppliers under the reverse charge procedures.
    4. Any VAT that must be paid following a correction or an adjustment for an error.
    5. Any other adjustments required under the VAT rules.

    In addition, to show the link between the input tax recorded in the business' records and that reclaimed on the VAT return, the following must be recorded digitally:

    1. The input tax which can be reclaimed from business purchases.
    2. The input tax allowable on acquisitions from other EU member states.
    3. Any VAT that can be reclaimed following a correction or an adjustment for an error.
    4. Any other necessary adjustments.

    The information held in the Digital VAT account is used to complete the VAT return using `functional compatible software’.  This is software, or a set of compatible software programmes, capable of:

    • Recording electronically the data required to be kept digitally under MTD for VAT.
    • Preserving those records electronically.
    • Providing HMRC with the required information and VAT return electronically from the data in the electronic records using an API platform.
    • Receiving information from HMRC.

    Functional compatible software is used to maintain the mandatory digital records, calculate the return and submit it to HMRC via an API.

    Getting ready - The clock is ticking and MTD for VAT is now less than a year away.

  • Entrepreneurs’ relief – what do the Budget changes mean?

    Ahead of the 2018 Budget there was some speculation that entrepreneurs’ relief may be scrapped. In the event, this did not happen. However, the relief made an appearance with the announcement of changes to the personal company test, applying from Budget day, and of a doubling of the qualifying period throughout which the conditions must be met for two years from 6 April 2019.

    Nature of the relief - Entrepreneurs’ relief reduces the rate of capital gains tax on disposals of qualifying assets to 10%. This is subject to a lifetime limit of £10 million. Spouses and civil partners have their own limit.

    The relief is available where there is:

    • a material disposal of business assets;

    • a disposal associated with a material disposal; or

    • a disposal of trust business assets.

    Availability of entrepreneurs’ relief is contingent on the qualifying conditions being met. The qualifying conditions depend on the type of disposal.

    The relief is complex, and a detailed discussion of the relief is beyond the scope of this article. However, guidance is available in HMRC’s Capital Gains Tax Manual at CG63950ff.

    Shares in a personal company - Entrepreneurs’ relief is available for disposals of shares or securities in a personal company. To qualify, throughout the ‘qualifying period’ the company must be a personal company and either a trading company or the holding company of a trading group. The taxpayer must either be an officer or an employee of that company or of one or more members of the trading group.

    The definition of a ‘personal company’ changed from 29 October 2018 (Budget day). Prior to that date, a personal company was one in which the individual held at least 5% of the ordinary share capital and that holding gave the holder at least 5% of the voting rights in the company.

    From 29 October 2018 two further conditions must be met. The holding must also provide entitlement to at least 5% of the company’s distributable profits and 5% of the assets available for distribution to equity holders in a winding up.

    Qualifying period - Entrepreneurs’ relief is only available if the conditions are met throughout the ‘qualifying period’. This is currently set at one year. However, it was announced in the Budget that the qualifying period will be doubled to two years from 6 April 2019 (except in relation to disposals where the business ceased prior to 29 October 2018).

    Securing the relief - The timing of the disposal is important in securing the relief. If the disposal is one of shares in a personal company, and the new definition is not met, the qualifying period clock cannot start to run until the date when all conditions are met. To secure relief, the shares should not be disposed of until at least two years from the date on all of the conditions are first met.

    Where the conditions have already been met for one year but will not have been met for two years by 6 April 2019, it may be preferable to dispose of the shares prior to 6 April 2019 to secure the relief. Alternatively, if the disposal is to take place after that date, it will make sense to wait until conditions have been met for two years in order to benefit from the relief.

  • Relief for replacement domestic items

    Where a landlord lets a property, even if the property is not fully furnished, it is likely that some domestic goods will be provided. It is also likely that at some point the landlord will need to replace these goods.

    Tax relief is available for the replacement, but not the initial purchase, of domestic goods, as long as certain conditions are met.

    The conditions - Relief is available if the following conditions are met.

    • Condition A – the individual or company must carry on a property business that includes the letting of one or more residential properties.

    • Condition B – an old domestic item which has been provided for use in the property is replaced with a new domestic item. The new item must be for the tenants’ exclusive use, and the old item must no longer be available to them.

    • Condition C – the expenditure is incurred wholly and exclusively for the purposes of the property business, and a deduction would be otherwise prohibited as capital expenditure.

    • Condition D – capital allowances have not been claimed in respect of the expenditure.

    Where the above conditions are met, relief is available for the cost of the replacement domestic item unless the property is a furnished holiday letting or rent a room relief has been claimed.

    What items count as domestic items? - Domestic items are items for domestic use. The definition is wide and includes moveable furniture, such as sofas, tables, bed frames, wardrobes; furnishings, such as curtains and carpets; household appliances, such as fridges, freezers, washing machines; and kitchenware, such a utensils, crockery, cutlery etc.

    Nature of the relief - Relief for the cost of the replacement item is given as a deduction in computing the profits of the property business.

    However, the amount of the deduction is limited to that for a ‘like for like’ replacement. Where the replacement is superior to the original – for example if a washing machine was replaced with a washer dryer – the relief is capped at the cost of a replacement which is equivalent (in current day terms) to the original.

    Relief is also available for incidental costs, such as the costs of delivery or disposal. However, the deduction is reduced for any consideration received in respect of the old item.

    Example - In 2018/19 a landlord who lets a furnished property replaces the old fridge with a fridge freezer costing £500. An equivalent fridge would have cost £300. He also replaces a sofa with a similar sofa. The replacement costs £600. He pays £30 for the fridge freezer to be delivered, and £15 for the old fridge to be disposed of. He sells the old sofa for £50.

    Under replacement domestic item relief, he can claim a deduction for £345 in respect of the fridge-freezer, being the cost of a like-for-like fridge plus the costs of deliver and disposal. He can also claim a deduction of £550 in respect of the sofa, being the cost of the replacement sofa less the proceeds from the sale of the old sofa.

  • High Income Child Benefit Charge

    The High Income Child Benefit Charge is effectively a clawback of child benefit paid to ‘high income’ individuals and couples. The charge does not only apply to the recipient of child benefit or the parents of the child in respect of whom child benefit is paid - it can also affect the partner of someone who receives child benefit, even if the child is not theirs.

    In the context of the High Income Child Benefit Charge, a person has a ‘high income’ if they have individual income over £50,000 in the tax year. For these purposes, the measure of income is ‘adjusted net income’. Broadly, this is your total taxable income before taking account of personal allowance and items like Gift Aid.

    When does the charge apply?

    If you have adjusted net income of at least £50,000, the High Income Child Benefit Charge will apply in the following situations:

    • you are entitled to child benefit for at least a week in the tax year and you do not have a partner with higher adjusted net income; or

    • your partner is entitled to child benefit for at least a week in the tax year and your income is more than your partner.

    Thus, in a couple where only one person had adjusted net income of more than £50,000, the High Income Child Benefit Charge will apply to that person, even if they do not receive child benefit or the child is not theirs. Where both partners have adjusted net income in excess of £50,000, the charge is levied on the partner with the highest income. Where the recipient does not have a partner, they will be liable for the charge if their income is more than £50,000.

    Amount of the charge

    The charge is 1% of the child benefit received in the tax year for every £100 by which the adjusted net income of the person liable for the charge exceeds £50,000. So, for example, if adjusted income is £57,000, the High Income Child Benefit Charge is 70% of the child benefit received.

    Where adjusted net income exceeds £60,000, the charge is equal to the full amount of the child benefit paid in the tax year.

    No equity in taxation

    In determining whether the charge applies, the income of the individual is considered in isolation to assess whether it exceeds the £50,000 trigger point. Thus, a couple earning £49,000 each (£98,000 in total) escape the charge, whereas a single parent earnings £60,000 must repay any child benefit in full.

    Further, the person liable to pay the charge may not be the person who received it, and consequently they are being taxed on income received by their partner – something that is rather contrary to the principles of independent taxation.

    Opting out

    Where the High Income Child Benefit Charge applies in full, the recipient can opt not to receive the child benefit rather than receive it and pay it back. This can be done online or by contacting the Child Benefit Office.

    HMRC calculator

    HMRC have produced a child benefit calculator, which can be used to see if the charge applies and, if so, the amount of the charge. The calculator can be found on the Gov.uk website at www.gov.uk/child-benefit-tax-calculator.

  • Buy-to-let landlords – relief for interest

    With rising property costs and low interest rates, many people took out a mortgage to invest in a buy-to-let property. As long as property prices continued to rise and the tenants paid their rent, investors could make money from the rising market while the rent from the tenant paid off the mortgage – all the investor needed was the deposit and to convince the bank to lend them the money.

    Fast forward a few years and the buy-to-let star is not burning quite so bright. Second and subsequent properties now attract a 3% stamp duty supplement – making them more expensive to buy – and relief for mortgage interest and other costs is being seriously reduced.

    Interest relief – the new rules

    Prior to 6 April 2016, the rules were simple. In calculating the profits of his or her property business, the landlord simply deducted the associated mortgage interest and finance costs.

    New rules apply from 6 April 2017, with changes being phased in gradually over a four-year period so as to move from a system under which relief is given fully by deduction to one where relief is given as a basic rate tax reduction. This changes both the rate and mechanism of relief. The changes do not apply to property companies – only unincorporated businesses.

    What does this mean

    Relief by deduction simply means deducting the amount of the interest, as for other expenses, in working out the profit or loss of the property business.

    Where relief is given as a basic rate tax reduction, instead of deducting the interest in calculating profit, 20% of the interest is deducted from the tax calculated by reference to the profit (as determined without taking out interest for which relief is given as a tax reduction).

    2017/18

    For 2017/18, a landlord can deduct in full 75% of his or her finance cost. The remainder is given as a basic rate tax reduction.

    Example

    Freddie has a number of buy to let properties. In 2017/18, his rental income is £21,000, he pays mortgage interest of £5,000 and has other expenses of £3,000. He is a higher rate taxpayer.

    Tax on his rental income is calculated as follows:

    Rental income                     £21,000

    Less:  interest (75% of £5,000)   (£3,750)

              other expenses          (£3,000)

    Taxable profit                    £14,250

    Tax @ 40%                          £5,700

    Less: basic rate tax reduction

    (20% (£5,000 x 25%))                (£250)

    Tax payable                        £5,450

    This compares to a tax bill of £5,200, which would have been payable had relief for the interest been given in full by deduction.

    Looking ahead

    The pendulum swings gradually from relief by deduction to relief as a basic rate tax reduction. In 2018/19, relief for half of the interest and finance costs is by deduction and relief for the other half is as a basic rate tax deduction. In 2019/20, only 25% of the interest and finance costs are deductible, relief for the remaining 75% being given as a basic rate tax reduction. From 2020/21 onwards, relief is only available as a basic rate tax reduction.

  • Has the dividend allowance cut hit home?

    The dividend allowance, which was originally introduced from 6 April 2016, was cut from £5,000 a year to £2,000 from 6 April 2018. Fortunately, the tax rates on dividend income, above the allowance, remain at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers; and dividends received on shares held in an Individual Savings Account (ISA) continue to be tax free.

    Many family-owned companies will allocate dividends towards the end of their financial year and/or the tax year, so for many people, it will be around March/April 2019 when the impact of the reduction hits home.

    How much tax is paid on dividend income is determined by the amount of overall income an individual receives. This includes earnings, savings, dividend and non-dividend income. The dividend tax will primarily depend on which tax band the first £2,000 falls in.

    For a basic rate tax payer – in 2018-19 this generally means someone with income less than £46,350 – the reduction in the dividend allowance from £5,000 to £2000 could lead to an increase in dividend tax of £225. Higher rate and additional rate tax payers may be worse off by £975 and £1,143 respectively.

    It is worth noting that if dividend income falls between multiple tax bands, the figures specified above will be different.

    Examples - Dividend income only - An individual who receives dividend income only of less than £2,000 in 2018/19 will have no tax to pay on their dividend income as it falls within the dividend nil rate band.

    Basic rate taxpayer - An individual who has, say, dividend income of £10,000 and other taxable income of £8,000 in 2018/19, will pay tax as follows:

    Total income                                                                                £18,000

    Less personal tax allowance                                                      (£11,850)

    Taxable income                                                                           £6,150

    Dividend income taxable at nil rate (£2,000 x 0%)                      £0

    Dividend income taxable at ordinary rate (£4,150 x 7.5%)         £311.25

    Total tax liability                                                                           £311.25

    Higher rate taxpayer - An individual who has, say, dividend income of £10,000 and non-dividend income of £40,000 in 2018/19 will pay tax as follows:

    Total income                                                                                £50,000

    Less personal allowance                                                           (£11,850)

    Taxable income                                                                           £38,150

    Non-dividend income at basic rate (£28,150 at 20%)                 £5,630

    Dividend income taxable at dividend nil rate (£2,000 at 0%)      £0

    Dividend income at dividend ordinary rate (£4,350 at 7.5%)      £365.25

    Dividend income at dividend upper rate (£3,650 at 32.5%)        £1,186.25

    Total tax liability                                                                           £7,181.50

    In this example, personal allowances are deducted first against other income, leaving £28,150 of other income falling within the basic rate tax band (£34,500 for 2018/19). Dividend income falling within the basic rate tax band is £6,350 (£34,500 minus £28,150 used), with the remaining £3,650 falling above the basic rate limit. The dividend nil rate is allocated to the first £2,000 of dividend income, falling wholly within the basic rate limit, leaving £4,350 within the basic rate limit. The remaining £3,650 of dividend income is taxable at the dividend upper rate of 32.5%.

    These examples show how complicated the allocation of various rate bands and tax rates can be, even in situations where a straight-forward dividend payment is made. Family business structures may be particularly vulnerable to the impact of the reduction in the dividend allowance, especially where multiple family members take dividends from the family company. A pre-dividend review may be beneficial, as family members could find themselves far worse off than first thought.

  • Take advantage of the Annual Investment Allowance

    The annual investment allowance (AIA) allows businesses to obtain an immediate deduction against profits for capital expenditure up to the limit of the allowance.

    Where a business prepares accounts using the more traditional accruals basis, they are not allowed to deduct capital expenditure in computing profits; instead relief for capital expenditure is given under the capital allowances system, whether in the form of the AIA, a first-year allowance or a writing down allowance.

    Where a business prepares accounts using the cash basis, different rules apply to capital expenditure.  Under the cash basis, capital expenditure can be deducted in computing profits unless the expenditure is of a type where such as deduction is prohibited, for example, as is the case for land and cars. Capital allowances are not in point (except for cars), and the annual investment allowance is not available.

    What expenditure qualified for the AIA? - The AIA is available on most items of plant and machinery, the main exception being cars. The AIA is likewise not available on items owned for another reason before they were used in the business or on items given to the proprietor or the business.

    The AIA can only be claimed for the period in which the item of plant or machinery was purchased. If the payment is due within four months, the date of purchase is when the contract is signed. Where payment is due more than four months later, the date is that of when the payment is due.

    The claim is made in the company or self-assessment tax return, as appropriate.

    How much is the AIA? - The allowance is set at £200,000 for 12-month periods. The allowance is reduced proportionately for accounting periods of less than 12 months (so, if the accounting period is nine months, the AIA limit for that period is £150,000 (9/12 x £200,000)).

    If qualifying expenditure in the period is less than the AIA for that period, the AIA can be claimed for the full amount of the expenditure. However, if qualifying capital expenditure in the period is more than the AIA for that period, the AIA can only be claimed up to the amount of the allowance, with relief for the balance of the expenditure being given by means of writing down allowances.

    Example 1 - Harry buys three vans costing £20,000 each in the year to 30 September 2018. The total expenditure of £60,000 is less than the AIA available for the period, so he is able to claim the AIA for the full amount of the expenditure.

    Example 2 - George buys new machinery costing £300,000 in the year to 31 October 2018. The expenditure exceeds the available AIA for the period of £200,000. He is able to claim the AIA on the first £200,000 of the expenditure. Relief for the remaining £100,000 is given by way of writing down allowances.

    How is relief given? - Relief is given as a deduction in computing profits for the period. Thus, claiming the AIA provides immediate 100% relief for capital expenditure.

    What happens when the item is sold? - If the item is sold, the proceeds are added to the relevant pool. This may trigger a balancing charge.

    Do we have to claim the AIA? - No – a claim is not mandatory. It will not always be beneficial to claim the AIA, for example if profits are insufficient or the item is likely to be sold after a short period triggering a balancing charge; it may be preferable to claim writing down allowances instead. The claim can be tailored to the business’ circumstances.

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  • Getting ready for MTD for VAT

    The start date for Making Tax Digital (MTD) for VAT is fast approaching – from the start of your first VAT accounting period beginning on or after 1 April 2019, if you are a VAT registered business with VATable turnover over the VAT registration threshold of £85,000, you will need to comply with MTD for VAT. This will mean maintaining digital records and filing the VAT return using MTD-compatible software. Businesses within MTD for VAT will no longer be able to use HMRC’s VAT Online service to file their VAT return. However, you can still use an agent to file your return on your behalf.

    Businesses whose VATable turnover is below the registration threshold do not have to joint MTD, but can choose to do so if they wish. However, once they are within MTD for VAT, they must remain in it as long as they are VAT registered – there is no going back.

    If you have yet to start preparing for MTD for VAT, it is now time to do so.

    What does MTD for VAT mean for you?

    Under MTD for VAT you will need to keep your business records digitally if you do not already do so. If you are already using software to keep your business records, you will need to check that your software supplier plans to introduce MTD-compatible software, and upgrade as necessary.

    If you do not currently keep your VAT records digitally or your current software supplier does not plan to introduce MTD-compatible software, you will need to choose software that will enable you to fulfil your MTD for VAT obligations.

    MTD-compatible software

    MTD-compatible software (also referred to as ‘functional compatible software’) is a software product or set of software products which meet the obligations imposed by MTD for VAT and enable records to be kept digitally and data to be exchanged digitally with HMRC via the MTD service. Where more than one product is being used, the data flows between the applications must be digital – data cannot be entered manually. However, businesses will be allowed to cut and paste data from one application to another until 31 March 2020, after which all links must be digital.

    Spreadsheets

    If you currently use spreadsheets to summarise VAT transactions, calculate VAT or to arrive at the information needed to complete the VAT, once MTD starts, you will be able to continue to do so. However, you will no longer be able to key the relevant figures into the appropriate boxes on the VAT return. Instead you will need to use MTD-compatible software to enable you to send your VAT returns to HMRC and to receive information back from VAT. Bridging software may be used to make spreadsheets MTD-compatible.

    However, to comply with MTD for VAT, the data must be transferred digitally – it cannot be rekeyed into another software package. But there will be a transition period and businesses can cut and paste until 31 March 2020, after which all links between products must be digital.

    Bridging software

    HMRC use the term ‘bridging software’ to mean a digital tool which is able to take information from another application, such as spreadsheets or an in-house system, and allow the user to send the data to HMRC in the correct format.

    Acceptable software

    HMRC produce a list of software companies that are working with them to produce MTD-compatible software. Details can be found on the Gov.uk website

    Partner note: VAT Notice 700/22: Making Tax Digital for VAT.

  • New savings accounts launched

    According to recent figures, an estimated 3.5 million people on low incomes are now eligible to open new government- incentivised savings accounts designed to help people build up a ‘rainy-day’ fund.

    Although much delayed since its original announcement in March 2016, the launch of the new Help-to-Save scheme follows an eight-month trial, with over 45,000 customers who have now deposited over £3 million.

    The new scheme is easy to use, flexible and secure, and aims to promote savings behaviours and habits, whilst encouraging people who may not have been able to save before, to build up a savings pot. In summary, subject to certain limits, investors can receive a 50p bonus for every £1 they save in this new type of account.

    How much is saved and when is up to the account holder – the rules stipulate that investors can save between £1 and £50 every calendar month. Accounts last for forty eight months from the date the account is opened and the government bonuses are added at the halfway point, i.e. after two years, and at the end of the four year lifespan of the account, or on the date that the individual becomes terminally ill or dies, if earlier. If an account is closed or ceases to be a help-to-save account before the end of a bonus period, no bonus is payable.

    The investment limits mean that £2,400 is the maximum an individual can save, with a maximum government bonus payable of £1,200. In comparison, high street banks are currently offering a typical interest rate of between 1 and 2% on savings bonds, which does appear to make the help-to-save account a particularly attractive option for someone looking to save.

    However, whilst the potential returns are very attractive, these accounts are specifically designed to help low earners and therefore, there are stringent rules on who can open one.

    The scheme, which will be administered by HMRC, is open to UK residents who are:

    • entitled to Working Tax Credit, and receiving Working Tax Credit or Child Tax Credit payments
    • claiming Universal Credit and have a household or individual income of at least £542.88 for their last monthly assessment period (though note that payments from Universal Credit are not considered to be part of household income)
    • people living overseas who meet either of these eligibility conditions can apply for an account if they are:
    •  a Crown servant - or their spouse or civil partner is
    •  a member of the British armed forces - or their spouse or civil partner is

    To apply, savers can visit www.gov.uk/helptosave or use the HMRC app. Opening an online account should be very straight-forward and it should take less than five minutes to do.

    HMRC must decline or accept an application an account within 21 days of the date of the application, stating reasons accordingly. Applications can be declined if HMRC have reason to believe that the declaration or application is untrue or contains matters which are untrue. The Regulations governing the scheme do allow for appeals where HMRC decline an application.

    Whilst feedback from the trial period has been largely positive, others have criticised the launch of such a scheme when the government is making changes to the benefits system. However, there are apparent benefits on offer, and any anyone meeting the eligibility criteria may wish to consider opening an account.

  • Dividend income – How is it taxed in 2018/19?

    The taxation of dividend income was reformed from 6 April 2016. Since that date, dividends are paid gross – there is no longer any associated tax credit – and all taxpayers receive a dividend allowance. Dividends not sheltered by the dividend allowance, or any available personal allowance, are taxed at the appropriate dividend rate of tax.

    Dividend allowance

    The ‘dividend allowance’ is available to all taxpayers, regardless of the rate at which they pay tax and unlike the savings allowance the amount of the dividend allowance is the same regardless of the tax bracket into which the recipient falls. Where the allowance is not otherwise utilised, it allows for tax-efficient extraction of profits from a family company.

    Although termed an ‘allowance’ the dividend is really a zero-rate band, with dividends covered by the allowance being taxed at a rate of 0% (the ‘dividend nil rate’). Significantly, dividends covered by the allowance form part of band earnings.

    The dividend allowance is set at £2,000 for 2018/19; a reduction of £3,000 from the £5,000 dividend allowance that applied for the two previous tax years. Assuming dividends of at least £5,000 are paid in 2017/18 and 2018/19, the reduction in the dividend tax allowance will increase the tax payable by £225 for basic rate taxpayers, by £975 for higher rate taxpayers and by £1,143 for additional rate taxpayers.

    Top slice of income

    Dividend income is treated as the top slice of income. This determines which band it falls in, and the rate at which it is taxed.

    Dividend tax rates

    Dividend income has its own tax rates. Dividend income is taxed at 7.5% (the ‘dividend ordinary rate’) to the extent that it falls in the basic rate band, at 32.5% (the ‘dividend higher rate’) to the extent that it falls in the higher rate band, and at 38.1% (the ‘dividend additional rate’) to the extent that it falls in the additional rate band.

    For 2018/19, the basic rate band covers the first £34,500 of taxable income. The additional rate band applies to taxable income in excess of £150,000. The bands are UK wide in their application to dividend income - the Scottish income tax bands apply only to non-savings, non-dividend income.

    Personal allowance

    If the personal allowance has not been fully used elsewhere, bearing in mind dividend income has the last call, any unused portion of the allowance can be set against dividend income. The personal allowance is £11,850 for 2018/19, although it is reduced by £1 for every £2 by which income exceeds £100,000.

    Example

    In 2018/19, Frances receives a salary of £25,000 and dividends of £30,000. Her personal allowance of £11,850 and the first £13,150 of her basic rate band is used by her salary, on which she pays tax of £2,630.

    The first £2,000 of her dividends is covered by the dividend allowance and is tax-free. However, the allowance uses up £2,000 of her basic rate band, leaving £19,350 available (£34,500 - £13,150 - £2,000). The next £19,350 of dividends is taxed at the dividend ordinary rate of 7.5% and the remaining £8,650 (£30,000 - £2000 - £19,350) is taxed at the dividend higher rate of 32.5%.

    The tax payable on her dividends is therefore £4,262.50 ((£2,000 @ 0%) + (£19,350 @ 7.5%) + (£8,650 @ 32.5%)).

    Planning tip

    Having an alphabet share structure in a family company allows dividends to be paid to family members to take advantage of their dividend allowance to extract profits tax-free.

  • SDLT and first-time buyers

    First-time buyers are able to benefit from Stamp Duty Land Tax (SDLT) relief when they buy their first home – but only if the property that they are buying does not cost more than £500,000. It was announced in the 2018 Budget that the relief would be extended retrospectively to first-time buyers buying their first share in a shared-ownership property.

    The relief is worth up to £5,000.

    The relief - SDLT relief for first-time buyers was announced in the Autumn 2017 Budget and introduced with effect from Budget day (22 November 2017). It applies to purchases of residential property of £500,000 or less by a first-time buyer, provided that the purchaser intends to occupy the property as their only or main home.

    Where the relief applies, the first-time buyer pays no SDLT if the price paid for their first home is £300,000 or less.

    If the first home costs more than £300,000 but less than £500,000, there is no SDLT to pay on the first £300,000 of the consideration, but the excess over £300,000 is liable to SDLT at 5%.

    Example - Chris buys his first home, a two-bedroomed flat costing £380,000. He will live in it as his main residence. The purchase completes in November 2018.

    As the purchase price is less than £500,000, he is able to benefit from first-time buyer relief.

    He pays SDLT of £4000 on the purchase ((£300,000 @ 0%) = (£80,000 @ 5%)).

    For comparison, a person buying a similar property who was not a first-time buyer would pay SDLT of £9,000 ((£125,000 @ 0%) = (£125,000 @ 2%) + (£130,000 @ 5%)). The availability of the relief saves Chris £5,000 in SDLT.

    The relief is not available where the first-time buyer buys a property costing more than £500,000 – SDLT is payable at the normal residential rates.

    Shared ownership - It was announced at the time of the 2018 Budget that SDLT relief for first-time buyers would be extended to purchasers of qualifying shared ownership properties who do not elect to pay SDLT on the market value of the whole property when they buy their first share.

    The relief applies to the first share purchased where the market value of the shared ownership property is £500,000 or less. Those paying less than £300,000 for their first share do not pay any SDLT; whereas those paying between £300,000 and £500,000 for their first share pay SDLT of 5% on the excess over £300,000. The relief also applies to any SDLT on the rental payments. However, it only applies on the purchase of the first share – it does not apply if further shares are purchased.

    The relief is backdated to apply retrospectively from 22 November 2017. First time buyers who have already purchased their first share in a shared ownership property since 22 November 2017 and paid SDLT without the benefit of the relief can claim a refund.

    Claiming relief - First-time buyer relief must be claimed in the SDLT return, or, where the return has already been filed, by amending the return.

  • Employment allowance – have you claimed it?

    The employment allowance is a National Insurance allowance which is available to qualifying employers. The allowance reduces employers’ (secondary) Class 1 National Insurance by up to the £3,000.

    The allowance is set at £3,000 or, if lower, the employers’ secondary Class 1 bill for the tax year.

    Who can claim?

    Most employers, whether a company or an unincorporated business, are able to claim the employment allowance if they are paying employers’ Class 1 National Insurance contributions.  However, if there is more than one PAYE scheme, a claim can only be made for one of them.

    Who can’t claim?

    The main exclusion is for companies, such as personal companies, where the sole employee is also a director. However, the allowance can be preserved if the sole employee is not also a director, or if the business has more than one employee.

    Remember to claim

    The employment allowance is not given automatically and must be claimed. This is done via the payroll software through RTI.  Although, ideally, the claim should be made at the start of the tax year, it can be made at any time in the year.

    Using the allowance

    The allowance is set against the employers’ Class 1 National Insurance liability for the tax year until it is used up, reducing the amount that the employer needs to pay over to HMRC.

    Unused allowance

    If the employers’ NIC bill for the year is less than £3,000, the unused amount cannot be carried forward or set against other liabilities. The allowance is capped at the employers’ Class 1 NIC bill for the year. It cannot be set against Class 1A or Class 1B liabilities, or against employees’ NIC.

     

  • Private residence relief and the final period exemption

    Private residence relief (also called main residence relief) is well known. It prevents a liability from capital gains tax arising on any gain on the disposal of a property which has been the taxpayer’s only or main residence throughout the period of ownership.

    Where a property has not been the only or main residence throughout, the amount of private residence relief is reduced. It is available both for the period during which the property was the taxpayer’s only or main residence and, currently, the final 18 months of ownership (the ‘final period exemption’). Where the property has been let, the chargeable gain may be further reduced by lettings relief (but note this is to be curtailed).

    The final period exemption is a useful exemption. It shelters the gain in the final period of ownership as long as the property has at some point during the period of ownership been the taxpayer’s only or main residence. It prevents a gain from arising if, for example, the taxpayer moves into a new home before the sale of the former home has completed. It also reduces the chargeable gain in respect of a let property that at some time has been the only or main residence. It is also a useful planning tool where a taxpayer has more than one residence.

    The final period exemption

    The final period exemption currently applies to the last 18 months of ownership. This is increased to 36 months where the taxpayer moves into care or is disabled.

    However, at the time of the 2018 Budget it was announced that the final period exemption would be halved from 6 April 2020. Where residence is disposed of on or after that date, only the last nine months of ownership qualifies for the final period exemption. However, it is to remain at 36 months when the taxpayer moves into care or is disabled. The government are to consult on the change.

    Planning ahead

    As the change does not come into effect until 6 April 2020, there is time to plan ahead. If a disposal is on the cards and the property has been the only or main residence at some point, but not throughout, the period of ownership, disposing of the property before that date shelters the last 18 months of ownership. Assuming that the legislation follows the same format as for the reduction in the final period exemption from 36 months to 18 months with effect from 6 April 2014, the critical date will be the date on which contracts are exchanged, which must be before 6 April 2020.

    Example

    Jack purchased a house on 1 November 2014. Until 31 October 2018 he lived in it as his main residence. On 1 November 2018 he completed on the purchase of a flat, which he lived in during the week. As he was planning to sell the house, he elected for the flat to be his only or main residence from 1 November 2018.

    If contracts on the sale of the house are exchanged before 6 April 2020, the last 18 months will be exempt, so the whole gain will qualify for PRR. However, if exchange occurs after 6 April 2020, only the final nine months will qualify for relief bringing some of the gain into charge.

  • Inheritance tax and potentially exempt transfers

    Aside from the annual exemption and the exemptions for particular gifts (such as those out of income or in consideration of marriage), it is possible to make gifts free of inheritance tax – as long as you survive for at least seven years after the date of the gift. The problem is that none of us knows when we are going to die.

    If the estate is not going to exceed the nil rate band (currently set at £325,000 plus the residence nil rate band (currently £125,000), available where the home is left to a direct descendant)), there is no rush to reduce the estate by making gifts. Remember also that the unused portion of the nil rate band and the residence nil rate band can be used by the surviving spouse or civil partner (for example, where the estate is left to the surviving spouse on the first death benefitting from the inter-spouse exemption).

    However, where the estate on death is likely to exceed the nil rate band, it can be beneficial from an inheritance tax perspective to make lifetime gifts – and the earlier the better. The rules allow the transferor to make unlimited lifetime gifts free of inheritance tax if he or she survives for seven years.

    PETs - A PET is a potentially exempt transfer. PETs are only chargeable if the transferor dies within seven years of making the gift. If the transferor survives at least three years but less than seven from the date of the gift, the IHT payable is reduced on a sliding scale.

    A gift to another individual or into a trust is a PET.

    No IHT when PET is made - It is assumed at the time at which the gift is made that the transferor will survive seven years and that the gift will remain free of inheritance tax. Consequently, no inheritance tax is payable at the time that the gift is made.

    Transferor survives seven years from date of gift - If the transfer survives at least seven years from the date on which the PET was made, it remains completely free of inheritance tax.

    Transferor dies within seven years of making the PET - In the event that the transferor does not survive seven years from the date on which the PET was made, the PET is brought into charge for inheritance tax. The value of the PET is cumulated with earlier transfers brought into charge, the death estate and subsequent transfers to work out the inheritance tax payable on the estate.

    However, as the nil rate band is applied to earlier transfers before later transfers, it may benefit from the nil rate band, such that the inheritance tax is payable on the death estate or subsequent lifetime transfer.

    If the transferor survives less than three years from the date of the PET, IHT is payable in full.

    Transferor survives at least 3 years - If the transferor survives at least three years but less than seven from the date of the PET, taper relief is available and the tax payable on the gift is reduced. Gifts made between three and seven years before death are taxed on a sliding scale.

    Years between gift and death     Tax paid

    Less than 3                                    40%

                     3 to 4                             32%

                     4 to 5                             24%

                     5 to 6                             16%

                     6 to 7                               8%

                     7 or more                         0%

    Planning ahead - Making lifetime gifts can potentially reduce the inheritance tax bill.

  • No Minimum Period of Occupation Needed for Main Residence

    Main residence relief (private residence relief) protects homeowners from any gains arising on their only or main home. However, there are conditions to be met for the relief to be available. One of the major ones is that the property is at some time during the period of ownership occupied as the owner’s only or main home. Where this is the case, the period of occupation as a main home is sheltered from capital gains tax, as is the final 18 months of ownership, regardless of whether the property is occupied as a main home for that final period.

    Living in a property for a period of time is worthwhile to secure main residence relief, not least because doing so has the added benefit of sheltering any gain that arises in the last 18 months of ownership.

    But, how long does the property have to be occupied as a main residence to trigger the protective effects of the relief?

    Quality not quantity

    A recent decision by the First-tier tax tribunal confirmed that there is no minimum period of residence that is needed to secure main residence relief – what matters is that there has been a period of residence as the only or main home.

    The case in question concerned a taxpayer who ran a property development company and who purchased a property in which he intended to live in as a main home. The property was initially purchased through the company, but the taxpayer intended to obtain a mortgage to buy it from the company. He lived in the property for a period of two and a half months whilst trying to sort out his finances. As a result of the financial crash, he was only able to secure a buy-to-let mortgage, the terms of which precluded him living in the property. The property was let to a friend, but the taxpayer moved in briefly following the friend’s death and undertook some decorating with a view to moving back in with his family. Due to health problems, this did not happen and the property was sold, realising a gain.

    The Tribunal found that the taxpayer had lived in the property as a main home, albeit for a short period. It was the quality of occupation, not the quantity, that was important. Consequently, main residence relief was available.

    Second homes

    Where a person owns a second home, living in it as a main residence, even if only for a short period, can be beneficial. This will protect not only the gain relating to the period of occupation from capital gains tax but also the last 18 months.

    Partner note: TCGA 1992, s. 222; Stephen Bailey v HMRC TC06085.

  • Deduction for interest costs

    The method of giving landlords relief for interest and other financing costs is gradually switching from one by deduction to one as a basic rate tax reduction. Once fully implemented, relief will only be available at the basic rate, regardless of the landlord’s marginal rate of tax.

    The transitional period lasts four years, with 2017/18 being the first year. It is important that landlords comply with the new rules and claim relief for interests costs correctly when completing their 2017/18 tax return.

    The transitional period - The change from relief by deduction to relief as a basic rate reduction is being introduced gradually.

    • For 2017/18, 75% of interest cost are allowed as a deduction, with relief for the remaining 25% as a basic rate tax deduction.
    • For 2018/19, 50% of the interest costs are allowed as a deduction, with relief for the remaining 50% as a basic rate tax deduction.
    • For 2019/20, 25% of the interest costs are allowed as a deduction, with relief for the remaining 75% as basic rate tax deduction.
    • For 2020/21 and subsequent tax years, relief for 100% of interest costs is given as a basic rate tax deduction.

    Relief by deduction - Interest costs qualifying for relief by deduction are simply deducted as for any other deductible expense from rental income in computing taxable rental profits.

    Relief as a basic rate tax deduction

    Where relief is given as a basic rate tax reduction, the amount of tax that is payable is reduced by an amount that is equal to the basic rate tax multiplied by the interest costs which qualify for relief as a basic rate tax deduction.

    Example - Assume a landlord has interest costs of £1,000 in each of the years from 2017/18 to 2020/21 inclusive, the amount they can deduct in calculating their profits and the amount by which the tax bill is reduced is shown below. It is assumed that the basic rate of tax remains at 20% throughout.

    Year .                      Deduction         Tax reduction BR

    2017/18                  £750                  £50 (£250 @ 20%)

    2018/19                  £500                  £100 (£500 @ 20%)

    2019/20 .                £250                  £150 (£750 @ 20%)

    2020/21                  £0.                     £200 (£1,000 @ 20%)

    If the landlord is a higher rate tax payer, the relief will gradually be reduced as the method of giving relief switches from deduction (where relief is at the higher rate) to relief as a basic rate tax deduction (where relief is given only at the basic rate).

    Claiming relief - Relief is claimed via the property pages of the self-assessment tax return. If a breakdown of expenses is provided, the interest costs qualifying for relief by deduction (75% of total interest costs for 2017/18) are entered in the relevant box on p.2 of the property income pages in the box headed ‘Loan interest and other financial costs’. The balance for which relief is given as a basic rate reduction is entered in the box on p.4 of the property income pages, headed ‘Residential finance costs not included’ in ‘loan interest and other financial costs’.

    It is important that the tax return is completed correctly so that relief is given in the right way.

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Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd.  Registered in England No. 05770414.

Registered to carry out audit work in the UK by The Association of Chartered Certified Accountants.

Details of audit registration can be viewed at www.auditregister.org.uk under number 8011438.

Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ

 

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