One of the questions that often comes up relating to buy to let is the question of taxation, and how to save tax.
The basics of buy to let taxation are not too complicated.
You add the profit onto you income and depending whether you fall into the 20% tax bracket or the 40% or 45% you pay tax at that rate. Beware, because by adding the profit from your property onto your salary you may pass from the lower bracket into the higher bracket.
There is some good news - there are no national insurance contributions usually because these are paid with your salary, and the Inland Revenue doesn't class buy to let as trading or working (obviously they don't have a lot of experience as a landlord!)
The key figure is the profit figure. This is your rental income less expenses.
Rental income
The rental income is the rent received. This is the gross amount of rent received, the amount before deducting agents fees. So if the rent is £500 a month or £6,000 a year, the amount of rent is £6,000 and not the £5,400 or so that you actually receive from the agent.
Expenses
Some expenses are not obvious and you need to go through the monthly statements for your letting agent (if you are using one) to find them. You can add the VAT as an expense because you are not registered for VAT and so will not be able to recover it. For example if a repair costs £100 and there is 20% VAT added your bill will be £120. The £120 is the amount of the expense that can be deducted.
Agents fees
Each month your agent should send you a statement, and perhaps one at the end of the tax year for the whole year. If you dot receive an annual bill for the tax year ask your agent if they will provide one. Check what you receive from the agent carefully as they are prone to making mistakes! Agents fees are typically 10% or 12%. However, VAT is added onto them so the final bill is much higher. The 12% figure becomes 14.4%!
Mortgage interest
Only the amount of interest is tax deductible. The capital repayment part is not deductible. If you have an interest only mortgage the amount of interest remains the same.
With a repayment mortgage you are repaying a part of the amount borrowed each month, so the interest amount varies each month. Every year you should receive a statement from your mortgage provider which will tell you the amount of interest that you paid. Some are better than others at automatically providing it, so be prepared to request one if you do not receive it by June.
Service charge
If you have a flat there will be a service charge. This may include the buildings insurance or even some utilities. You should receive an annual bill from the service company. As this is typically for a calendar year you may need to apportion the bill, say 3 months of one year and 9 months of another, because the UK tax year is from 6 April to 5 April (although many people take from 1 April to 31 March as it's easier and not much different)
Ground rent
This is the amount you pay to the freeholder.
Insurance
Insurance is deductible. But be careful because the insurance contract is not usually for the same period as the tax year. You will have to calculate how many months of each premium relates to the tax year.
Travel
Some travel costs are tax deductible in the UK. Costs that are not deductible are the ones to see properties that you do not end up buying. And travel to your parents with a side trip to a property is not deductible. However, inspection visits, repair visits or showing the property to prospective tenants is. The trick is to claim mileage of 45p per mile for the journey, and support this with a petrol receipt (even though the amounts will be different). Obviously if you travel by tube, train or bus you should deduct the receipted amount.
Annual gas inspection
You should deduct the invoice received from the contractor. However, it may be included in the agent's bills if the agent has arranged it.
Other - telephone, stationery, tax advice, legal fees... keep the receipts and deduct accordingly.
Repairs
Repairs are tax deductible expenses, but you need to understand what is a repair. A repair is basically fixing something that is broken on a like for like basis. If you improve something it is not a repair. So fixing a leaking tap is a repair, but replacing it with a much better one is an improvement. You need to be careful because if you replace a broken wooden fence with metal railings this could be seen as an improvement. Improvements generally add value to the property. Repairs fix broken things.
Wear and tear allowance
This is 10% allowance given by HMRC if you rent the property furnished. You must choose to claim it, it won't be given automatically, and it applies only to furnished lettings. Essentially it is an allowance for the depreciation or use of the fixtures and fittings, and cover wear and tear to beds, sofas, table and chairs. Note that it does not cover repairs to the infrastructure such as the roof or heating system. If you have to repair the roof you can still deduct the cost.
Let's see what a typical buy to let tax calculation looks like.
Rental income
12 x £500
£6,000
less Agent's fees of 10% + VAT
£720
Mortgage Interest
£-2,082
ฝากขายบ้าน Insurance
£150
Repairs
£200
Other expenses
£50
Total Costs
£3,202
Profit (Income less costs)
£2,798
Tax will be due on the profit at either 20%, 40% or 45%.
Tax tips:
Claim for everything and keep the receipts Don't forget to claim for advertising for tenants, travel costs for going to the property and shopping people around. Don't forget any council tax or utility bills if the property was empty. Consider putting the property (or some of it) in a partner's name if they are in a lower tax bracket, e.g. in the 20% bracket whilst you are in the 40% bracket.
Remember to keep receipts for everything.
Do not try to cheat the taxman - they have years of experience and know the approximate amount of profit you should get, and what percentage each expense usually is. So if there are some unusually high expenses be prepared to answer some questions and to provide receipts.
Trying not to declare any rental income is equally futile in the age of connectivity and computers.
Disclaimer
Tax laws do change and this brief guide only details the general basics of UK taxation and does not constitute tax advice. You should seek specialist advice from a tax accountant on tax related matters. Note that taxes frequently change and this is a guide at today's date only.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น