Self Assessment time

Agencies and other headaches, keys and cleaners, running costs and contracts...in short, all the things we spend so much of our time doing behind the scenes.<br>
Kate24
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Self Assessment time

Post by Kate24 »

Hi

I have been letting since Feb16 (a UK property) and am now putting together my first self assessment :shock: since starting the business.

It seems fairly straightforward (!?), income only from Feb 16 - Mar 16, set up expenses and expenses for those months. My only nightmare is the rather huge pile of receipts I now need to work through :roll:

A question I wondered about was as we used to live in the property we left a lot of our furniture there for use by the holiday let. Is there anyway of attributing a charge/cost for this? It is in effect an un-reciepted expense as we then had to purchase furniture for our new home when we moved out.

Also, do other owners tend to do their own tax returns or is there much advantage in seeking professional help for the return? I appreciate this would vary case by case but anyone that outsources their tax return, would you be happy to share roughly how much you pay for this service?

Many thanks in advance :D

Kate
newtimber
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Re: Self Assessment time

Post by newtimber »

Kate24 wrote:
A question I wondered about was as we used to live in the property we left a lot of our furniture there for use by the holiday let. Is there anyway of attributing a charge/cost for this? It is in effect an un-reciepted expense as we then had to purchase furniture for our new home when we moved out.

:D

Kate
You have to claim capital allowances for furniture etc. and since you have no receipts, you cannot claim anything. Of course, you could have taken the old furniture to your new home and bought new furniture for the holiday let instead then you would have the receipts ...
ianh100
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Post by ianh100 »

We currently use an accountant that specialises in FHL. It really depends how complex your finances are. There are some advantages to FHL, for example you can declare income in a ratio you decide even if the property is jointly owned. So if one person is a lower rate tax payer and the other higher you can declare earnings 100% against the lower rate owner.

The rules for capital allowances are very complex so I really would suggest you get advice on that one. We were advised not to do so as the assessment work required would probably cost more than we would save.

We pay around £400 for our accounts and tax return. Probably worth it for the first year and you can then decide if you handle yourself after that.
Kate24
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Post by Kate24 »

Thank you newtimber - perhaps I need to swap the furniture around and utilise my receipts . . .

Thank you IanH.
The property is jointly owned, but I do 99.9% of the work associated with the holiday let. Cleaning, marketing, researching etc so I was going to put it all through my tax. Although being my first year and having the set up costs there will not be any tax to pay this year.

Do you have an accountant that you would recommend? I have had a look around and found a few options but you never really know if they are any good and have sufficient experience/expertise in holiday lets.

Any recommendations from anyone would be appreciated.

Many thanks, Kate

:D
Jemima Copping
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Post by Jemima Copping »

Hi Kate,
We have been doing our holiday let for 2 years now. Last year I prepared our tax return myself online, and am busy doing the same this year. It is fairly straightforward and the HMRC has webinars that you can sign up for. You can also phone them up if you are unsure about what to do.
I consulted a local accountant when we started up, it cost me £100 for an hour. I would ask around locally for recommendations if you want to go down that route. I would think that most accountants should be able to do practically anything, especially if you are in a region which is a holiday destination.
It all depends on how much time you have as well, if you are working full time then an accountant, but if not and are retired like me, it is worth the saving of several hundred pounds to do it yourself. Here is a link to a helpsheet which I downloaded today from the webinar. http://www.gov.uk/government/publicatio ... t-hepsheet.
Hope you get on ok! All the best
Jemima.
Better to be mutton dressed as lamb than mutton dressed as mutton!
newtimber
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Post by newtimber »

Kate24 wrote: The property is jointly owned, but I do 99.9% of the work associated with the holiday let. Cleaning, marketing, researching etc so I was going to put it all through my tax.
:D
I should check with an accountant that you can do this or if it is advisable to do this from a tax point of view. Is all the income & expenditure going solely through your own personal bank account? Is your joint owner going to receive absolutely nothing from their ownership of the property not just in this year but subsequent years too?
Jemima Copping
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Post by Jemima Copping »

That is exactly why I consulted an accountant first. I use my personal bank account, a business account would charge for everything-I know this because I ran a small business for 20 years.
If your joint owner is your spouse, as mine is, you each have to declare half the income and half the expenses, split down the middle. You can't say 'well I did all the cleaning and paperwork so I get more than you'. He gets half and I get half the profit which is added on to any other income such as pension or earned in another way, and you are taxed accordingly.
The online self assessment form calculates your tax automatically once you have entered all the information, and as I said before, you can phone up to clarify any point and also join in a webinar.
I have done both and found the help I needed with no bother at all. The advisers are very pleasant to talk to and eager to help.
Better to be mutton dressed as lamb than mutton dressed as mutton!
e-richard
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Post by e-richard »

Jemima Copping wrote:The advisers are very pleasant to talk to and eager to help.
I agree with that statement, but a warning: The nearer to Jan 31st we get, the harder it is to get hold of those folks. They get VERY busy.
** Richard
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They say we learn from our mistakes. That makes me a genius !
tchn
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Post by tchn »

Jemima Copping wrote: If your joint owner is your spouse, as mine is, you each have to declare half the income and half the expenses, split down the middle. You can't say 'well I did all the cleaning and paperwork so I get more than you'. He gets half and I get half the profit which is added on to any other income such as pension or earned in another way, and you are taxed accordingly.
That is true for residential lets but not for Furnished Holiday Lets, where the split can be decided appropriately. Evidence here: https://www.gov.uk/hmrc-internal-manual ... 5#IDAOFU4E
tchn
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Post by tchn »

Our accountant advises that HMRC are unlikely to question how you allocate profits between partners if there is no tax to pay (i.e. because there is no profit). It would seem strange for them to insist on your partner going through with his own self-assessment if there is no profit to consider.

We thought we would do it ourselves, but then used an FHL accountant and have kept using him because he understands how to interpret the grey areas and HMRC are less likely to quiz the accounts when they are signed off by a professional.
ianh100
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Post by ianh100 »

100% agree with tchn. One of the few benefits of qualifying as FHL is that you can declare profit in whatever ratio you want to. There are also capital gains benefits but these can be quite complex.

These HRMC rules can of course change at any time so you need to check each year that the situation is the same.

I would agree with earlier comments that if you have the time to educate yourself thats great. Also be aware than MANY accountants and financial advisors don't understand the difference between buy to let and FHL. My financial advisor recently told us that we could not use FHL income with pension contributions when in fact you can, but cant with buy to let income. The difference is that we run a business and offer a "service" something HMRC occasionally challenge.

As always each situation can be very different. if your tax affairs are very simple and rental income modest then do it yourself. If you both work then you may find £400 for a tax return saves way more than that in paying tax that is not due.
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Cymraes
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Post by Cymraes »

I also agree with tchn. The property is jointly owned by my husband and me but the business is entirely mine. He has his own sources of income.

My accountant is well aware of this and the income is assessed as mine.
Jemima Copping
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Post by Jemima Copping »

e-richard wrote:
Jemima Copping wrote:The advisers are very pleasant to talk to and eager to help.
I agree with that statement, but a warning: The nearer to Jan 31st we get, the harder it is to get hold of those folks. They get VERY busy.
The trick is to phone first thing in the morning.
Better to be mutton dressed as lamb than mutton dressed as mutton!
newtimber
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Post by newtimber »

tchn wrote: That is true for residential lets but not for Furnished Holiday Lets, where the split can be decided appropriately. Evidence here: https://www.gov.uk/hmrc-internal-manual ... 5#IDAOFU4E
Yes you're right. But it also means that you might want to allocate the profit/loss in the most tax efficient way between the partners regardless of who does the most work.
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Nemo
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Post by Nemo »

Even accountants get it wrong. Furnished Holiday Letting is a complex affair and all accountants don't get it right. It's quite a specialist area. I also agree with all those above who state that the spilt of ownership does not automatically dictate how the profit/loss is split.
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