Remember to submit your tax return by 31 January 2012
18/01/2012 by Atif Javid
The deadline to submit your online tax return is quickly approaching.
You must send your tax return online by midnight on Tuesday 31 January 2012.
The deadline is only later than this if you received your tax return, or the letter telling you to complete a tax return, after 31 October 2011. In this case you'll have three months from the date you received that letter.
If your online tax return is late, you'll have to pay a penalty. This applies even if you have no tax to pay or if you pay all the tax you owe on time.
Rents on residential properties are subject to UK tax. This is because letting residential property is treated as a single business, even if you let out more than one property. If you let out several properties, you can offset losses from one against profits from another. You pay tax on any profit as part of your overall income.
What counts as residential lettings? Properties that you let out for people to live in as their home count as 'residential lettings'. For tax purposes these are treated differently from furnished holiday lettings.
If you rent out part of your own home this can also count as residential lettings, but you can take advantage of the 'Rent a Room' scheme instead. This lets you get tax-free income of up to £4,250 from letting rooms in your home.
How do you work out your taxable profits from residential lettings?
Step One: You work out your 'net profit' as follows: (a) add up all your rental income; (b) add up all your 'allowable expenses'; (c) and take your allowable expenses away from your income
(If you have more than one residential letting, you group all the income and all the expense figures together). Step Two: To arrive at your taxable profit deduct any allowances you're entitled to from you net profit:
If you let furnished property, you can deduct either of (a) a 'wear and tear' allowance - based on a percentage of your rent (b) a 'renewals' allowance - the cost of replacing old items with a new equivalent (but you deduct any money you get from selling the old item).
You may also be able to deduct certain 'capital' allowances for the cost of equipment relating more generally to your lettings business - check the detail in our related article.
How do you report your profits to HM Revenue & Customs:
If your profit is less than £2,500: If you're employed, or getting a pension through PAYE, and your taxable income from property is less than £2,500, your Pay As You Earn (PAYE) tax code can be adjusted to collect the tax on your property income each year. Just ask HM Revenue & Customs (HMRC) to send you form P810 to report your income each year.
If your profit is £2,500 or more or you're not on PAYE: In this case you'll need to fill in a Self Assessment tax return.
For the tax year 2010-11, if your total income from UK property is £70,000 or more in a tax year you must declare it on the land and property pages of the Self Assessment tax return and show your expenses separately. If it's below £70,000 you can group the expenses as a single total on your tax return.
When you fill in your tax return, put in the rents and expenses for the year they relate to - it doesn't matter when you actually receive and pay them. It's quickest and simplest to file your tax return online. The figures you put in add up automatically. The filing deadlines are also more generous if you don't want to work out your tax bill yourself.
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