What’s the new rent a room relief legislation?

October 11, 2018 By Iain

From 6th April 2019, new legislation, and not necessarily for the better, will come into effect.

It will mean that you won’t be entitled to rent a room relief unless you are living in your home for some or all of the time that you let your rooms to lodgers.

Current Situation

The current situation is that any property owner who lets all or part of their homes to lodgers receives rent a room relief. This is in the form of tax free income, the lesser of £7,500 or £3,750 per year. So, for a property owned jointly, each owner would be allowed to earn £3,750 tax free.

However, this current legislation is going to change. To help with domestic finances, there has been an increase in people letting out rooms. This is either from people working away from home and supplementing their income or short term cash benefits from sporting events. In July 2018, HMRC proposed new legislation with the aim of preventing this from happening in the future.

Changes to Rent a Room Relief

From 6 April 2019, as a property owner, in order to claim rent a room relief, you will have to live in your home for at least one day during the period when you have tenants. If you rent out your rooms or home on an Airbnb basis, rent a room relief is still available as long as you live in your home for at least one day during every period of letting. The legislation is slightly woolly. It refers to wholly or partly so that would suggest a minimum of one day.

Whilst not as generous, there is some good news. When rent a room relief doesn’t apply, you will be able to claim £1,000 tax free property allowance.

It is worth considering how these new rules may affect you. If there are any significant changes to the final proposed version of the legislation when the Finance Bill 2019 is published in December 2018, we will update you with a new blog.

Action

If you are interested in receiving further information or booking a strategic consultation with Iain to see where he can help you legally avoid tax, please contact Jacqueline on telephone 0191 603 0270 or email admin@iainwallis.com

Landlord & Letting Show Coventry 26-27 November

October 28, 2014 By Iain

We will be exhibiting at the Landlord & Letting Show taking place at Hall 2, Stoneleigh Park, Coventry, on Wednesday 26th & Thursday 27th November 2014, and we hope you can join us! Maybe on day two help us celebrate as we are finalists in the prestigious Landlord & Letting Show Awards with the winners to be announced during the show.
It’s free to attend and the event aims to educate and inform property professionals by offering access to:
• A comprehensive product and services exhibition

• Free seminars covering a wide range of topics delivered by leading industry experts.

• There are two presentations from me entitled “5 Top Tax Tips to Legally Avoid Property Taxes” one on Wednesday at 11.30 and one on Thursday at 14.00. These are always full so be sure to be there in plenty of time

• Associations and Government Bodies
• Fantastic networking opportunities
• Information on the latest legislation
Visit the website at http:www.warwickshire.landlordshow.info to find out more and book free show tickets, then come along and visit us on stand 38.

Always happy to chat legal tax avoidance and share the love.

2013/14 Tax Return Deadline …… “Use the White Space”

January 10, 2014 By Iain

So, you were too busy and missed the self-assessment deadline of 31 October 2013 and are now you are frantically trying to complete and submit online by 31 January to avoid the £100 penalty, interest and potential penalties.

Yep that deadline is approaching far faster than you appreciate but equally with every passing day goes the need to be stuck in some detox vortex where you are forced to have a green smoothie for breakfast and eat more greens than a rabbit does in an average year.

However, what to do when you and/or your accountant , (though hopefully not your accountant but you’d be surprised ) can’t decide what or how to declare a complex transaction or one which may be open to a different interpretation by HMRC?

The law states “you must provide any additional information you think HMRC will need to check your tax bill” and this is where the ‘white space’ comes into its own. That said there is a degree of crystal ball gazing as who knows what HMRC think some days

Here are a few situations where I’d suggest you use the white space:

1. To back up a complicated entry on a tax return, for example, a capital gains tax calculation on the sale of your home where you have used part of it for business.

2. Where you’re claiming Principal Private Residence Relief on a property that’s been let out but used to be your main home.

3. Where you aren’t sure of a figure for example, where the tax rules require you to make a judgement, say, on the amount of a business expense to claim

In the majority of cases, not using the white space to explain a questionable tax return won’t cause you any trouble, but should HMRC question your tax return and thinks you haven’t declared information you ought to have, the result may be a penalty charge or a greater penalty if it turns out you made a mistake. Remember that the law does not require perfection, more that you take reasonable care when preparing the return.

As a reminder, you are responsible for the entries on your tax return, even where your accountant completes it for you. So, please don’t just check the figures; make sure the white space entry is completed if appropriate.

If you are struggling with the deadline approaching or are interested in receiving further information or booking a strategic session with Iain, please contact Jacqueline on 0191 206 4080 or email admin@iainwallis.com.

Nigella’s Late Christmas Gift from HMRC!

January 7, 2014 By Iain

You may be aware or at least your accountant should be that tax relief is allowed by HMRC for the cost of capital equipment used in your business.

Rather surprisingly however, tax deductions are also allowed in the form of capital allowances (CAs) on items such as computers, tablets and other equipment purchased as gifts by others, but used in the course of your business.

For CA purposes you must value the gift when you first use it for business (& you were all back at work straight after Boxing Day weren’t you) and reduce this figure to take account of any non-business use. You can then claim this on the Employment pages of your 2013/14 tax return.

A simple example:

Nigella receives a PC as a gift for Christmas
Like all electrical equipment it fell in value as soon as it left the shop, so a value of 90-95% of its purchase price would be reasonable i.e. market value of £3,000
Nigella estimates personal use of 15% i.e. £450
Nigella can therefore claim CAs of £2,550, which since she is a 45% taxpayer will reduce her 2013/14 tax bill by £1,147.50

Tip 1:
If employed then Nigella can speed any tax relief by asking her tax office to include the £2,550 CAs in her 2013/14 code number. That way £1,147.50 will be given to her by April 2014 as a reduction in the PAYE tax she pays on her salary.

Tip 2:
Even better more tax and NI can be saved if Nigella sells the computer to her business at market value. The company pays the market value to Nigella on which no tax or NI is payable and Nigella reduces her salary by the same amount, so there’s no net cost to the company. This results in a saving to Nigella of £1,350 in tax and £60 NI and the company also saves £414 on the employers’ NI it would have paid on the £3,000 salary sacrifice. A little bit for the geeks but hey it’s worth being a geek to save some tax.

So what gifts did Santa leave you that you can claim tax relief on?

If you are interested in receiving further information or booking a strategic session with Iain to see where you can legally avoid tax, please contact Jacqueline Campbell on telephone 0191 206 4080 or email admin@iainwallis.com.

Why Tax Avoidance is still legal

May 31, 2013 By Iain

“No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue.”

This delicious quote from the judgment of Lord Clyde (Ayrshire Pullman v CIR (1929) 14TC 754) has always been the foundation on which accountants like me, who help their clients with legal tax avoidance have built their arguments.

Parliament has rejected this judgement by enacting the general anti-abuse rule or GAAR. Taxation it is argued is not to be treated as a game where taxpayers can indulge in any ingenious scheme in order to eliminate or reduce their tax liability.

So watch out Jimmy Carr!

But what does it mean for those of us who do arrange their affairs to avoid tax but not in such an aggressive way?

Well the good news is that those who feared that it would be a charter for HMRC to crush and penalise anything it didn’t like have not materialised. Instead we have a reasoned argument that making the most of the rules is just fine but taking steps which are artificial, abnormal or simply to escape tax will be caught by GAAR. The downside is that what you consider to be fair and reasonable may not be quite the same as that of your local Tax Inspector!

So what does that mean in the property world:

Giving assets to your spouse or children to reduce tax while it may avoid tax isn’t abusing the rules
Switching the capital gains tax relief between main residences is allowed; that will no doubt keep a few MP’s happy

That said few of us are engaged in the aggressive tax planning used by the likes of Jimmy Carr so in the real world nothing really changes.

Or as the neighbours might say plus ca change J

If you would like a strategic session to review your affairs please email Iain@iainwallis.com

Taxability 2013/14: Over 65 proven legal ways to save tax

April 23, 2013 By Iain

Do you really want to give the taxman £521,700?

It’s a lot of money, isn’t it? But, even before the current economic crisis, that’s how much someone earning £30,000 a year would have paid in taxes over their lifetime. While if you are lucky enough to earn more than £30,000, your lifetime tax bills will probably have been even higher.

However, because of the economic crisis, as the country starts to pay the billions to balance the Government books, your tax bills will almost certainly soar even higher still.

As a result, there is a tax bombshell about to explode.

Of course we all have to pay our fair share of taxes. But there’s no reason why you should pay more than your fair share of that tax burden, is there?

Unfortunately, paying more than their fair share is precisely what many people do… often without even realising it.

So, because we don’t want you to be one of them, here’s our up to date easy-to-use tax-busting checklist.

In just a few pages it reveals 70 powerful ideas to shave many pounds – perhaps even many thousands of pounds – off your tax bills.

Just think, even if you can only shave 5% off your tax bills, if you earn £30,000 a year that tiny 5% saving adds up to an extra £26,085 in cash to spend and enjoy during your lifetime.

And if your earnings are much more than £30,000 per annum then your savings could well be disproportionately higher – quite possibly as much as a 50% reduction in the tax you have to pay.

What could you do with that sort of money?

The TaxAbility checklist has been specifically designed to help you start to identify where and how to make these sorts of savings.

And it has been designed to take less than 25 minutes to complete. It could be the most profitable 25 minutes you’ll spend this year.

Once you’ve filled it in we strongly recommend that you discuss all of your “no” answers with your Chartered Accountant.

Of course, if you don’t have a Chartered Accountant, or you would simply like someone to give you a fresh perspective on your options, we would be delighted to help you.

Iain Wallis – Proven Tax Strategies For High Net Worth Individuals