tax Archives - Page 21 of 21

News,May 2018

splitting rental income for tax purposes

How is Rental Income Taxed on Jointly Owned Property?

George11/10/2022tax , Tax Issues

In the case of properties where there is the involvement of multiple owners is observed, there will come certain expectations from HMRC. This will make each partner liable for paying tax on the amount of income they share, file for the self-assessment tax returns separately, and maintain the records. People find splitting rental income for tax purposes to be tax efficient and reduce the amount on their tax bills in such cases as well. Like every other income source, this joint venture also brings in some tax implications that each partner will have to consider seriously. Moreover, there has to be routine preparation for making a declaration of the joint property so that the tax bills are sent to you accordingly. Many people wonder at this stage who is responsible for splitting the income. Because the preparation of the income is different for each one of them. HMRC normally consider the partners to pay tax on half of the income so it is an automatic split of income between the joint owners. The income is split because of the tax purpose. There are several questions asked regarding this split. We have got you covered here in this article and you will find the answers in the discussion on the split of income for being tax efficient, how much amount of tax each partner will pay, how to choose the different split, and what will happen if there is a chance of selling the property. Reach out to one of our professionals to know more about splitting rental income for tax purposes. We will love to offer instant help! Splitting Rental Income for Tax Purposes – How Much Each Partner Will Pay? If you are not a married couple, the process of share is very simple for your case. You will simply have a share in the rental profit and it will be dependent on the share percentage you own for a particular property. Here we will take an example of a live-in couple who are together for quite some time and have invested in a property together. The property is flat for example. 70 per cent of the money is invited by the female partner and the remaining 30 per cent is the share of the male partner. They decide to put the property on letting to earn from the rental income. Now the share of income will depend on the investment. The female partner will get 70 per cent because of her investment percentage, whereas the male partner will get 30 per cent. Again because of the percentage of his investment share. Furthermore, the case becomes a little different when you are in a civil partnership or a married couple. You will be liable to invest with a ratio of 50:50 and the same will be the matter of rental income share. It does not matter to HMRC whose account details are being used for the transfer of the rental income unless the 50 per cent share is received by each partner. Different Splits – How to Choose It? The stage of choosing a different split and how to do it will totally depend on your situation. Because the scenario will be unique and always varies from one person to another. However, the following are a few imperative factors that you should consider: If you aim to save more on tax by being tax efficient, you have a chance by using your personal allowance. This is possible only when one of the partners is staying at home. If each partner falls into a different tax band, there are chances to get the rental income taxed with the reduced rates. This will allow you to get reduced tax bills as well. Moreover, in the case you are not a married couple, you can take the help of a lawyer who can draft a Severance of Joint Ownership for you. You will have to file this Severance of Joint Ownership by getting in touch with the land registry. There is no other requirement to file with HMRC. There will be a new percentage in your next self-assessment tax returns that you will have to use further. In the case of civil partnership Declaration of Trust will be drafted by your lawyer. You will fill it out with HMRC after the completion of form 17. What Will Happen If We Sell Out the Property? Several people enquire about a situation when a couple who are in a civil partnership or a married couple aim to sell the property. This is imperative to understand here that the legal title of the property is not transferred when you as a married couple plan to file a declaration of form 17 and trust. This is because the selling situation of the property will require you to reverse the process. The following steps have an explanation of how is that possible for you: You should assign back the beneficial interest that is 50 per cent for each partner. You will be required to file form 17. This will allow each partner to use his tax-free capital gains tax allowances. The Bottom Line Now that you have gathered a fair amount of information about splitting rental income for tax purposes, we can bring the discussion towards wrapping up. We can say that the tax implications on the jointly owned property are a tricky process in comparison to other situations as you will have to consider multiple factors like the investments share of each partner and how much each partner will pay in form of tax. We hope these few minutes of reading will help you to develop a better understanding of tax implications related to jointly owned properties. This will allow you to make better choices. Get in touch with our young, clever and tech-driven professionals if you want to know more about splitting rental income for tax purposes. Disclaimer: The information about splitting rental income for tax purposes …

Do I Pay Tax on My Treehouse?

George29/09/2022tax

Being pleased by the nature is an innate ability of human psychology and we will not deny that. How about having leisure time in the comfort of the house with the placement of a treehouse in your garden? Sounds fun right? Through such activities, you get a break from the routine and get a chance to soak up nature as well. Are you the one who is seeking a way to build a treehouse? Here is something very important for tax on my treehouse, that you should know before you do it. This will be a pleasant addition to your amenities. Do you know if the treehouse is taxable or not? And if yes, what could be the possible outcome of building a treehouse in your main home? This has been observed by the owners of houses that they found a sudden increase in the tax bills after they built a treehouse in their main home. It is best and advised to learn about this and later take your time to decide about your treehouse. As per HMRC, building a treehouse in your home increase the value of a residential property. Otherwise, if a building or main home is being used for the benefit of the tenants or there are such gaining factors, building a treehouse will be more and more beneficial. This means that the residential building that is near nature or has the perks of a treehouse will be charged more tax than other buildings. Further, in the discussion of this guide, you will get the answers to frequently asked questions like what is the tax on my treehouse, what are tax implications in this case, and why is there a need for a building permit to make a treehouse. Our clever and qualified tax advisors and bookkeepers can assist you to maintain the tax on my treehouse and calculate accurate VAT refunds at CruseBurke. Feel free to contact us. What is a Treehouse – What is the Tax on My Treehouse? This is discussed earlier as well that landscaping a garden in the residential property or building a treehouse with the purpose of gaining benefits from the tenants will immediately put you in the higher tax brackets. If you have gathered the relevant information, there will not be any doubts after receiving your increased tax bill. Several people enquire about whether the treehouse is huge enough to be taxable or not. Well, there are a few factors that will help to realise the importance of the set of rules in this regard. The most important thing that decides the tax implications is to identify whether a building is a permanent building or a non-permanent building. This will be helpful to know whether a treehouse is huge enough to have a foundation for its building structure to be called a permanent part of the building or not. If built otherwise, the building will be considered temporary and no tax implications will be there. A permanent part of the building with a foundation is up for all types of tax implications. Property Tax Implications on a Treehouse You are not allowed to take the decision of building a treehouse on a foundation as the permanent part of your residential property without the building permit. You will have to seek permission from the local government in that case. Moreover, there is also a requirement of covering a certain limit of the area of your residential property. This treehouse will be a permanent part of the residential property, which will be a gaining factor for the owner of the building. Over the ransom of benefits, the tenants or other guests will get a factor of entertainment. You are now liable to bring this into HMRC’s knowledge before you build because this will bring in new tax implications. If you fail to do so, you will be charged with a fine and will have to suffer serious consequences. What is the Requirement of a Building Permit in the Case of a Treehouse? You must have realised the fact that building a treehouse is a serious matter as it will add to your current tax bill and you will have to cover a certain limit of the area with the permission of the local government. This is because this is now a permanent part of your residential property and the value of your main house is now increased. However, in the case you fail to get permission for a building permit from the local government, there can be unfavourable consequences for you in the future. This can bring in a loss for you financially. Your Main Home Value After Building the Treehouse Once you are done with the process of seeking the building permit and have started to build your treehouse, this will be considered a permanent structure that is based on a foundation. The house value will be automatically increased. Now the permanent structure is not easily taken away from the house as well. Barns, garages, sheds, and treehouses are examples of permanent structures with residential property that are not removed easily from the building. The Bottom Line Now that we have gathered a fair amount of information about tax on my treehouse, we can bring the discussion towards wrapping up. We mean to explain that the addition of a treehouse is not only a source of attraction for the building, but it will add to the building’s value. Due to this very fact, there will be an increase in the tax bills as well. The factors of your location will also affect whether a treehouse will go taxable or not. Let’s blow away all your tax or VAT worries by hiring professional and experienced accountants at CruseBurke in the UK. Reach out to us by giving us a call. Disclaimer: All the information provided on tax on my treehouse, including all the texts and graphics, is general in nature. It does not …

Explained: Buy to let Mortgage Interest Tax Relief

George05/08/2022tax , VAT

In previous years, landlords in the UK could deduct mortgage interest payments directly from their rental income, significantly reducing their tax bill. However, since Section 24 of the Finance Act 2015 was fully implemented in April 2020, this is no longer the case. The landlord tax landscape has shifted, and many landlords—particularly higher-rate taxpayers have faced increased tax liabilities as a result. If you’re a landlord wondering how this affects you and whether incorporation might help, this guide will give you a clear overview. What Changed Under Section 24? Prior to April 2020, landlords could offset 100% of their mortgage interest against their rental income. This meant you were taxed only on your net rental profit after deducting mortgage expenses. Now, under the Section 24 rules, mortgage interest is no longer an allowable expense for individuals. Instead, all landlords—regardless of tax bracket—receive a basic rate tax credit of 20% on eligible interest payments. Example: You pay £8,000 in mortgage interest. Under the old rules, this could reduce your taxable rental income by £8,000. Under the new rules, you pay tax on the full rental income, then claim a 20% tax credit, saving just £1,600 instead of up to £3,200 if you were in a higher tax bracket. Why This Matters for Higher-Rate Taxpayers For basic rate taxpayers, the 20% tax credit largely aligns with their income tax rate—so the change is relatively neutral. However, for higher-rate (40%) and additional-rate (45%) taxpayers, the financial impact is significant. You are now taxed at your full marginal rate on the gross rental income, without relief for interest costs, and only receive a 20% credit. This can: Push your total income into a higher tax bracket Reduce your personal allowance if your income exceeds £100,000 Affect eligibility for child benefit, pension contributions, or student loan repayments Why Your Tax Bill May Appear Higher With no interest deduction, your taxable rental income increases—even though your real (cash-based) profit hasn’t changed. This results in higher reported income on your Self Assessment tax return and, in many cases, a higher tax bill. Other forms of income—such as employment, pensions, or dividends—may also compound this effect. Is Incorporating a Buy-to-Let Business the Solution? One increasingly popular strategy is setting up a limited company to hold your rental properties. Incorporated landlords (i.e. companies) can still treat mortgage interest as a deductible expense before calculating corporation tax (currently 25%), rather than dealing with the Section 24 restrictions. Potential Benefits: Deduct full mortgage interest Lower effective tax rate (corporation tax vs personal income tax) Greater flexibility on reinvesting profits Retain earnings within the company Considerations: You’ll face additional accounting and legal costs Transferring properties from personal to company ownership may trigger: Stamp Duty Land Tax (SDLT) Capital Gains Tax (CGT) Mortgage refinancing requirements Before incorporating, it’s crucial to weigh the long-term financial impact, as it’s not a one-size-fits-all solution. Making Tax Digital (MTD) – What Landlords Need to Know in 2025 Another key development affecting landlords is Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). From April 2026, landlords with property income over £50,000 per year must: Keep digital records Use HMRC-compliant software Submit quarterly updates and an end-of-year finalisation MTD will apply to those earning over £30,000 from April 2027, with a pilot scheme already in place. If you’re affected, preparing now can make the transition smoother. Can You Still Claim Any Relief? Yes – although full mortgage interest relief is gone, you still receive: A 20% tax credit on eligible interest Deductions for other allowable expenses, including: Letting agent fees Repairs and maintenance Property insurance Council tax and utility bills (if paid by landlord) Keeping good records and understanding what you can still claim is key to minimising your tax bill. The Bottom Line Section 24 has significantly changed how landlords are taxed in the UK. While you can no longer deduct mortgage interest from your rental income, you do receive a 20% tax credit. This change hits higher-rate taxpayers hardest and has prompted many to consider incorporating their property business. If you’re a landlord with a growing portfolio—or you’re concerned about rising tax bills—speak to an accountant before making decisions. Incorporation may help, but only if structured correctly. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly. Call us on 02086868876 or email us today. We will come up with fine solutions. Disclaimer: The information about tax relief on mortgage interest provided in this blog includes text and graphics that are general. This does not intend to disregard any of the professional advice.

Things you Need to Know about Research and Development Tax Relief

George22/03/2021Accounting Issues , tax

Research and Development (R&D) Tax Relief is initiated by various governments (including the UK) to encourage and support companies to develop and research for long-term economic growth. Along with the public sector, the private sector is also receiving benefits from this relief. Let’s explore, how it can be beneficial for your business. We’ll be discussing the following points in this blog: What is research and development tax relief? Who qualifies for R&D tax relief? Advancements Proof of uncertainties and unsuccessful advances Type of R&D You can avail of tax relief against the cost of R&D stated in Part 13 of the Corporation Tax Act 2009 which provides a range of tax deductions and credits for qualifying costs. You may reach out to us to discuss whether you qualify for this relief or not! What is Research and Development Tax Relief? Research and development tax reliefs ensure to aid businesses who are working on innovative projects in science and technology. Companies that are struggling to research and develop an advance in their field are encouraged to apply for this relief. Even, companies that are unsuccessful in their technological endeavours can also apply for this allowance. Companies can claim Corporation tax relief if a project fulfils the requirement of R&D as per HMRC. Who Qualifies for R&D Tax Relief? To be qualified for R&D, a project should be aimed to achieve advancement in science and technology. The research and advancement in social sciences (Like economics, or pure maths) do not qualify for R&D tax relief. Additionally, the project in which you are making an advancement must be related to your existing business or the one you are willing to start after getting the data from R&D. To qualify for R&D relief, you must make sure to explain how your project: shows the advancement in science and technology. had to control the uncertainties have worked to get over those uncertainties was unable to be carried out by professionals The research project should be aimed at enhancing a new process, service, or item or can improve something that already existed. Advancements: The project you are claiming for R&D relief must be beneficial for the overall field, not just for your own business. This implies that any technology used in your sector for the first time cannot be called an advance for R&D. If an advance by another company in a service, product, or process that is not publicly acknowledged or available, is also accepted for this relief. Proof of Uncertainties and Unsuccessful Advances: A scientific uncertainty means a field professional claims that something is not possible technologically. It also refers to the question of possibility even after getting the required evidence. It means that experts in your field are unaware of advancement or its procedure. Your company should show that a project has been accomplished after overcoming uncertainties through analysis, research, and testing. As evidence, you can show the project details depicting failures and successes during the project. Types of R & D: R & D relief has two types. These types differ based on the size of a company and whether the project is outsourced to you or not. R&D Relief for Small and Medium-sized Enterprises (SME): This relief is for you if: You are running a small or medium-scale business with fewer than 500 employees. Your turnover is less than €100m and your total balance sheet is below €86m. You may be required to mention linked companies and partnerships if you’re an SME. This relief provides companies to: Claim tax credit of 14.5% in case of surrenderable loss. Research and Development Expenditure Credit (RDEC): Large companies can request RDEC for the cost occurring in R&D projects. The works subcontracted by SMEs or RDECs from large companies can also claim this credit. It is a tax credit that has been increased to 20% on 1 April 2024 and onward. Quick Wrap-up: So, if your company is investing in R&D, it is worth spending. There are a lot of incentives and support given by the UK government for companies who want to accelerate in the field of research and development. Ultimately, this relief can help to transform your business. If you’re looking for further support regarding R&D tax claims, we’d love to know more about your business to provide the right solution. You may contact us now! Disclaimer: The information about the R&D tax relief provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.