income tax on let property - I bet someone knows!

[thisparentinggig]

Is it charged at 20% corporation rate (soon to be 18%) if you put it on self-assessment, (HMRC online manual "PIM1020" says individuals are classed as property businesses (!), even if they are letting a property using an agent (!!)

OR

is that just HMRC trying to get more revenue by bypassing the personal allowance for earnings below the basic rate of income tax?

Any ideas?

(I could phone HMRC but I'm not receiving any property income, so they'll think I'm clogging up their phone-line if I say that I'm just curious with a need for challenge and stimulation!)

Ours was taxed at the applicable personal rate. Which may be higher than 20% if the rental income takes you into the higher rate band because you are also PAYE.

And they did deduct the personal allowance from mine!

I let a property and it is my only uk income. I've been advised by hmrc as its below my personal allowance I don't need to pay tax on it. Although I do need to complete a return each yr.

If you're a comaony you will pay 20%, an individual will pay at their marginal rate and personal allowance is available for offset

it is taxed as any other kind of income. You put it on your tax return, with any expenses, and that's it. If it comes out below the personal allowance, no tax to pay.

it is not 'earned income' though (bet many on here will love that) so can't be used to up your pension contribs.

Any profit you make after allowable deductions will be charged at your marginal rate of tax.

Only a limited company will pay corporation tax on profits. As a director, if you take a regular salary that is taxed as personal taxation. Most people with a small number of properties just pay income tax on the profit.

Thats a very misleading statement by HMRC .... mentioning business and individual in the same sentence is clumsy.

It would be better worded "income (less certain allowable expenses) from Land and Properties owned by individuals (as opposed to Companies) is considered to be personal income and taxed as per individual tax bands.

Presumably there is a point where it is advantageous to hold properties in a business structure with 18% corp tax instead.

Sunny lots of individuals run businesses, not just buy to let landlords!

However only companies pay corporation tax.

A business could be run by a sole trader, a partnership or a company.

is there a list of the allowable expenses?

The usual ones are mortgage interest (for now, this will change in 2017), repairs to the property, management fees, cost of gas safety certificates, insurance.

bowsaw For now, you can opt to assume that upkeep is costing you 10% of the annual rent - nice and simple. From a date in the future, possibly 2017, you can only claim on what you actually spent on upkeep (which does not include betterment) so you will need to list the outlays individually and will need to keep all invoices / receipts as proof.

Last (financial) year our BTL flat got a new security-controlled door on the close, and next (financial) year the close will be painted. I assume that both would be allowable expenses for the above purposes, especially since the local council initiated both and we don't have a choice.

NiceBit - the 10% deduction is only available for furnished lettings, on top of other allowable costs mentioned before.

ok, so if i have this right the accountant should be fine submitting things like carpet, new basic kitchen, appliances, paint etc as its not improving the house but keeping it habitable

We have b2let properties and any profit is deducted from our personal allowance

bowsaw - if you have an accountant can't you just give them a list of all you've spent and let them put together the allowable profit/loss figure? That's what I did when I was preparing rental accounts for the clients.

We use an accountant. Best £125 we spend each year. HMRC said we owed them thousands. Turned out they owed us! HMRC when questioned as to why they were so far out and caused us such angst were surprisingly quiet!

crikey im using the wrong accountant if thats all you pay

I might add that I put all the figures together on a spreadsheet and don't just hand over a bundle of receipts etc so it is relatively simple for the accountant and they advise me it take them about 45 mins to an hour so not a bad hourly rate for them. I live in SE London too. £125 fee is also excluding VAT...

£125 in London! I've shopped around several times over the years and pay x4 that. I do get advice too though.