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  • Tax

    Tax returns - how to include S24?

    My accountants tried to apply it to my 2016/7 tax return and then all they did was include 75% of the interest in my costs.

    I had to point out their errors and they were very apologetic but I don't hold out much hope for next year. My only saving grace is that there is a good chance I'll be a lower rate taxpayer for this year anyway; which on reflection may not help if my accountants still can't get their heads around the calculations.

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    We use Thomson Reuter’s Digita software for all our clients here, and this will help look after the necessary adjustments when we start the first tax returns affected next year, i.e for the 2017/18 tax year.

    Each software will have its own methodology, so certainly care must be taken to ensure the calculation is correct.

    If you are using the HMRC website to file your tax return, one can only hope they will have a sensible approach to the recording of this next year!

    Best wishes,

    RITA4Rent

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk


    Hi Michael,

    Thanks for your input.

    Will this year's return include a "payment on account" that factors in S24?

    In other words, will affected landlords have a larger payment due on 31st January 2018 due to S24 being factored in?

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    This Jan will be the lowest tax bill most of us will ever see again

    and tax will grow year on year with every new Jan that comes

    start saving boys and girls

    I put my Money in Premium  bonds so the more I put in may bring me a nice prize (well you have to look on the Brightside lol Keep smiling

    As they used to say to us at Sandhurst If you can not take a joke you should not have joined

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    Learn Change and Adapt ?????


    Hi Vanessa,

    Payments on account are calculated based on the results of the tax return being prepared, although they can be adjusted (as I will touch upon in a moment).  As S24 is not affecting the 2016/17 tax returns being submitted at the moment, then you would not be making any additional payment in January which you refer to.

    “Payments on account” may fall due in addition to the tax you owe when completing your self assessment tax return.  This is quite a complex area, and if you are in any doubt, it is strongly advised to seek professional assistance here.  Essentially, when completing your self assessment tax return, if you owe over £1,000, you may need to make additional “payments on account.”  There are circumstances where payments on account do not fall due if you owe over £1,000, the main reasons being if more than 80% of tax arising under self assessment is covered by tax deducted at source (such as from employment income) or given the fact capital gains tax and student loans not being included in the payment on account computation.  These payments in advance go towards potential tax owed under self assessment in the following tax year.  As a for instance, if when you prepare your 2016/17 tax return you discovered that payments on account fall due, in addition to the tax liability owed under self assessment, then these additional payments will fall due on 31st January 2018 and 31st July 2018.

    To illustrate payments on account in action, let’s assume that an individual owed £1,500 when completing their 2016/17 self assessment tax return, and that given the circumstances, they also need to make additional payments on account towards the following tax year. Therefore, the payments they would be required to make would be as follows:

    -    £1,500 by 31/1/18 – to cover the tax owed under self assessment in the 2016/17 tax year.
    -    £750 by 31/1/18 – first payment on account towards the 2017/18 tax year. 
    -    £750 by 31/7/18 – second payment on account towards the 2017/18 tax year.

    You will note that each of the advance payments represent 50% of the tax owed the prior year.  The following year, you will need to submit a 2017/18 self assessment tax return. Note, you have already paid £1,500 towards any tax arising under self assessment in this year.  Depending on circumstances, payments on account may continue the following year, or they may cease.  With regards the above example, if for instance when you come to prepare your 2017/18 self assessment tax return, if you owed just £500, then you would be in a refund position.  This is because 2 payments on account totalling £1,500 have already been in advance towards this tax year.  Therefore, a refund of £1,000 would arise. However, you may be able to claim to reduce payments on account, if, for instance, your property profit was unusually high in the 2017/18 tax year.  Payments on account may be reduced via a form named SA303 which may be found here: https://www.hmrc.gov.uk/sa/forms/sa303.pdf  

    Hope that helps and best wishes,

    RITA4Rent


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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk


    Thanks for all the comments


    My thinking behind the question was more around how proactive the HMRC have been (or will be) in delivering this new regime.


    In terms of direct communication to landlords, I’ve had nothing at all from the HMRC. They know who the landlords are via the “land and property” returns on the self assessment forms.

    There must still be landlords out there blissfully unaware of this, and it feels like HmRC have missed a trick to communicate directly with its “customers”.


    With those unaware landlords in mind, I was wondering therefore whether HMRCs calculation tool would be updated to apply these percentages automatically, thus forcing the implication of the new regime.


    If they do, fine.


    But if they don’t, unaware landlords won’t know they have to restrict their mortgage interest amount, their taxable profit will be lower and they will pay less tax, leaving them with more money in their pocket than us landlords who do keep ourselves up to date with these changes and complete our returns correctly.


    That scenario doesn’t sit well with me as it would seem to reward those landlords who don’t keep themselves up to date, even though of course they run the risk of being investigated by the HMRC and found to have submitted incorrect returns.



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    'Ie will we expected to put in 75% of our mortgage interest amount or do we still put in 100% as before and the HMRC automatically calculates the 75% amount?'

    THE FORMER CANT BE CORRECT AS IT WONT FACTOR IN THE ELEMENT THAT IS NOT HIGHER RATE.

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    Exactly my thought.  There is already one box for mortgage interest etc so presumably the obvious thing to do would be to put in all of the interest paid and the hmrc systems would automatically restrict the relief as appropriate - because this will depend entirely on overall income levels.

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