Tax Returns For Other Circumstances

Many people have an a second house (or more) that is being rented out for an income stream. Perhaps you have a buy to let (BTL) investment and are looking for advice on completing your self assessment Tax return.

Preparing rental accounts are a little similar to preparing accounts for sole traders and partnerships, but rental income does have it’s own complications. Confusion can surround certain costs, for example whether something is a revenue cost or capital cost.

There are also specific reliefs, rules and regulations, for example that of furnished holiday lettings, and the restrictions surrounding the deductible costs of mortgage relief. It can quickly become very complicated, especially if you have multiple mortgages and properties.

There are numerous sources of income, untaxed at source that would give rise to the need of submitting a Tax return to HMRC. Some examples would be:

• State benefits received, including state pension, carer’s allowance, incapacity benefit and many more
• Gains on life insurance policies
• Foreign income
• Some forms of savings interest

The Taxation rules surrounding these can be quite tricky, and unless you have experience with these aspects, it can be easy to make a mistake. We would encourage you to contact ourselves for a no obligation quote.

If you have annual investment income over £10,000 before Tax, then you are legally required to file a Self-Assessment Tax Return. This is because the nature of investment income can be quite diverse by nature, and not all of the income is Taxed under the same rules. It’s also quite possibly some of the income has not been Taxed at all.

Examples of investment income would include:

• Interest on standard bank and building savings accounts
• Interest received from National Savings and Investment products (NS & I), but some of these accounts are Tax free
• Interest & dividends received from unit trusts
• Other dividend income received

Particular care should be taken when reporting investment income. Some accounts are Tax free such as ISAs and LISAs from April 2021, whereas some other products have Tax free allowances.

One area that can trip people up is Capital Gains, and it’s often an area where HMRC like to mix up the rules every few years. So what you might have understood some years ago, might not apply this day.

Capital Gains are essentially profits that you have made on the disposal (or part disposal) of certain assets. These assets can include:

• Sale of stocks and shares
• Disposal of property – residential or commercial
• The sale of a business, and/or business assets
• Sale of valuables & collectables
• Many more

Different rules, regulations and reliefs apply to each category of asset. From entrepreneurs relief to business asset relief, it can quickly become extremely complicated.

With regards to dividends received, there have been quite a few material changes made recently which increase the Tax payable. In the past, basic rate Tax payers were able to receive dividends Tax free as long as the income didn’t push them into higher rate. The rules have since been updated and are as follows:

• Year ended 5th April 2021 : £5,000 Tax free
• Year ended 5th April 2022 : £5,000 Tax free
• Year ended 5th April 2023 onwards : £2,000 Tax free

The rate of Tax you pay depends on your level of income. Where the dividend sits at basic rate, the chargeable dividend rate is 7.5%, 32.5% for higher rate Tax payers and 38.1% for additional rate Tax payers.

You must be aware that it is possible for dividend income to fall within two, or even three rates depending on the amounts received.