The 2017/18 tax return filing deadline is fast approaching and you really don't want to get your tax return wrong, or even worse, not file one at all ...
There are two important changes for the 2017/18 tax return which we have discussed in previous blog posts, but are worth mentioning again:
If you are a landlord, remember that 2017/18 is the first year that mortgage interest relief is being restricted and phased out for higher rate taxpayers. It seems ages since George Osborne announced it pre-Brexit, but 2017/18 is the first year that is affected.
75% of the interest may be offset against the rental income rather than a full 100%. In the following tax years, it continues to be phased out so in 2018/19 only 50% may be claimed, in 2019/20 only 25% may be claimed and in 2020/21 nothing may be claimed.
All is not lost though as there is the still the ability to claim relief at 20% on the restricted element once the tax on the rental income has been calculated. Sound complicated? Well yes, it's not easy, hence why HMRC are expecting a swathe of incorrect tax returns.
This will be good news for some as you can get up to £1,000 each tax year in tax-free allowances for property income, and if you have both types of income, you'll get a £1,000 allowance for each.
The trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income from:
HMRC state that if your annual gross income from these is £1,000 or less, you don't need to tell HMRC, unless you can't use the allowances. In addition, this allowance doesn't apply to trading income from a partnership.
There is further good news on the property allowance:
Unfortunately, you can't use the allowances if the income comes from a company that you or someone connected to you owns or controls, a partnership where you or someone connected to you are partners, or your employer or the employer of your spouse or civil partner.
If you choose to claim the allowance you are unable to claim any other expenses against this income source. This includes the rent a room relief when renting a room in your own home.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.