Offshore Tax Warning

With capital gains tax now levied at 28%, it has been revealed that H.M Revenue & Customs are ardently investigating people who they think may be evading the tax by placing taxable profits in offshore accounts.  Buy – to -Let Landlords who sell property and don’t declare the be warned!

Ordinarily income, which is taxed from rent from a second home or a buy-to-let property can be offset against certain expenses and is separate from CGT that you pay when you sell the asset.

Tax Relief on Income

  • Accountancy fees;
  • Tax relief on interest of the loan (But not the capital);
  • Furniture & fittings wear & tear (10%) of original value;
  • Replacing damaged fixtures, doors, cupboards etc can be claimed as long as the new replacements are of equal or less value than the original one.  Higher value replacements can be deemed as capital.
  • Double-glazing to replace broken single glazed windows is acceptable.

Capital Gains Tax can be offset against capital expenses.

  • The cost of the property;
  • Stamp duty, legal fees, surveyor fees, estate agent fees;
  • Extensions, upgraded kitchens, bathrooms, conservatories or anything structural, which adds extra value to the property;

Income tax can be reduced when married couples or partners own a rental property jointly.  Dividing rental profits equally, the profit from rent would be offset against two separate sets of applicable personal allowances.  Income tax is usually dealt with under the terms of self-assessment, based on the tax year itself, (April –April) and is based on simple rental income minus expenses.

Madalena Penny

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