B A R B I C A N L I F E ADVERTORIAL
Are you paying too much income tax on your rental property?
We all like to think that we’re doing what we can to legitimately reduce the amount of tax we pay; here are my tips to ensure that you don’t pay too much income tax on your rental property.
Jointly owned property; making the best use of differing rates of income tax. Where two or more individuals own a property, any rental profit is usually divided equally between them according to their share in the property. By agreement, married couples and civil partners can make an election to hold unequal shares in the property so that the person with the lower rate for income tax has a larger share of the rental profit. The paperwork must be in order though; in May this year a couple was penalised by the Tax Tribunal for not having the necessary paperwork to support unequal shares.
Make sure you claim the repairs which are deductible against rental profit. Common examples are exterior and interior painting and decorating, damp and rot treatments, replacing roof slates, flashing and gutters and upgrading single glazing to double glazing windows. If the repairs are substantial they
may still be deductible provided the character of the asset remains unchanged. For example, if a fitted kitchen is refurbished and is replaced with a similar standard kitchen. Generally, if the replacement is like- for-like or the nearest modern equivalent it will be accepted.
Claiming the interest element of any mortgage or other funding. Only the interest is deductible; check this element within your repayment terms or consider switching to ‘interest only’.
Wear and Tear and Renewals allowances. Wear and Tear allowance is equal to 10% of the net rents. Renewals
allowance is the net cost of replacing a particular item of furniture but not the cost of the original item. If one of the allowances is to be used it must be used consistently; it is not possible to alternate the allowances from year to year.
Legal and other professional costs. The incidental costs of obtaining finance that are wholly and exclusively incurred for the purpose of buying the property are normally allowable, so the legal and mortgage brokers’ fees for the mortgage.
I’d like to know more about saving tax; what do I do now? Please call or email me on 020 7324 1534,
rodsmith@stoneking.co.uk, to arrange a meeting.
Your Local Solicitors
Stone King offers expert legal advice for you on:
Wills & saving tax Powers of Attorney Probate & trusts Buying and selling property Care funding Family law and mediation
Please call or email Rod Smith on 0207 324 1534,
rodsmith@stoneking.co.uk.
We offer an initial review at our offices without charge. 16 St John’s Lane London EC1M 4BS
www.stoneking.co.uk 39 Rod Smith, Partner
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