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Chapter 06 - Property income - Coggle Diagram
Chapter 06 - Property income
Property income
Cash basis (default): Property income = rent received in tax year - Expense paid in tax year
Accrual basis
Rent receivables in tax year - Expense payables in tax year
Must be used if
Cash basis for the tax year >150,000 pounds
Company carries on property business
Election made by 31 Jan 22 months from the end of the tax year
Allowable deductions
Special rules for interest and other finance costs: 25% are deductible, remaining 75% * basic tax rate to reduce tax liabilities
No deductions for capital items
Landlord can use mileage allowance
Relief for replacement of domestic items
Available if domestic item is replaced
Relief = new asset - proceeds from old asset
If new asset is not the same, only the equivalent price allowed
Furnished holiday lettings
Accommodation counts as FHLs if
Available for commercial letting >210 days
Actual let at least 105 days
Tenants do not stay over 31 days. Can be let to same tenants longer than this if they don't take up more than 155 days
Located in EEA
Loss can only be offset against future profits of FHLs
Advantages of FHLs
No restrictions on finance cost
Capital expenditure is deductible when incurred
Relevant earning for pension contribution
CGT relief available
Lease premium on short lease (=< 50 years)
Property income assessment = Premium (A) - 2% x (number of years on lease - 1) x Premium (A)
Trading income deductions for traders = property income on assessment of lessor / Life of lease
Rent-a-room relief
First 7,500 from tenants is tax-free
If rent exceed 7,500: Assessed on rents received - normal rental expense
Can elect to assessed on rents over 7,500 without deduction for expense