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Contacting HMRC
Contacting HMRC A taxpayer may need to contact HMRC if they have a query about their tax affairs. There are various ways…
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Capital expenditure and cash basis
Capital expenditure and the cash basis The cash basis is the default basis of accounts preparation for landlords with annual rental income of £150,000 or less running unincorporated property businesses. Under the cash basis, income is only recognised when received and expenses are only recognised when paid; there is no need to account for debtors and creditors or prepayments and accruals. Simpler rules also apply to capital expenditure. Under the accruals basis, expenses can only be deducted in calculating taxable profit if they are incurred wholly and exclusively for the purposes of the business and are revenue in nature. Relief for capital expenditure is given either through the capital allowances system or as a deduction when computing the gain or loss on the disposal of the property. However, under the cash basis, capital expenditure can be deducted unless it falls into one of the categories listed below in respect of which a deduction is specifically prohibited. Expenditure which is incurred on or in connection with the acquisition or disposal of a business or part of a business cannot be deducted in calculating the taxable profits of the property rental business. Likewise, no deduction is available in respect of expenditure on an item of a capital nature which is incurred on or in connection with the provision, alteration or disposal of: any asset that is not a depreciating asset; any asset that is not acquired for use on a continuing basis in the trade; a car; land; a non-qualifying intangible asset, including education or training; or a financial asset. A depreciating asset is one which within 20 years is either no longer of use as a business asset or has a value of 10% or less of its value at the time that the expenditure on it was originally incurred. Where the let is a residential let (including now a holiday let), the cost of domestic items cannot be deducted. Instead, relief is given when the item is replaced in accordance with the relief for replacement domestic items. Where the landlord uses the cash basis and incurs capital expenditure which is not deductible, relief may be available under the capital allowances system or in calculating the gain or loss on sale. If you would like any further information…
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Incomplete VAT invoice
When an incomplete VAT invoice is issued VAT-registered businesses can generally reclaim VAT on goods and services purchased for business purposes. However, for a…
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Self-Assessment after bankruptcy
Do you know what to do if you need to file a self-assessment after bankruptcy? Our latest article tells you more… Where…
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Claim relief for excess interest
How to claim relief for excess interest Landlords running an unincorporated property business obtain relief for interest and finance costs incurred in relation to residential lets (including holiday…
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Late registering for self-employment?
Registering late for self-employment – The tax implications Having made the big decision to start a self-employed business, there will be countless decisions and administrative…
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Temporary reduction in VAT
Temporary reduction in VAT on children’s meals and certain attractions On 21 May 2026, the Chancellor announced a temporary reduction in the…
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Passing on investment property
Passing on the investment property A landlord will need to consider whether it is better to pass on an investment property during their lifetime or on their death. Here, we look at the associated tax implications. On death Where a landlord dies, any investment properties that they have will form part of their estate at death and, unless they are sheltered by the nil rate band, inheritance tax (IHT) will be payable at the rate of 40%. However, there will be no capital gains tax to pay. The property benefits from a tax-free uplift at death and the beneficiary’s base cost will be the market value of the property at the date of death. The maximum exposure here is 40% of the value at the date of death. Gifting the investment property In a bid to avoid a hefty IHT charge, landlords may decide it is better to give their investment property to their children while they are still alive. However, if the property has increased in value since they purchased it, this will trigger a capital gains tax charge, even though the landlord does not receive any proceeds. This is because where an asset is gifted to a connected person (such as a child), the capital gain will be worked out using the market value at the date of the gift. Any gain not sheltered by the annual exempt amount (£3,000 for 2026/27) or by losses will be taxed at 18% where the landlord’s income and gains fall in the basic rate band (£37,700 for 2026/27) and at 24% once the basic rate band has been used up. If the property is a residential property in the UK, the gain must be reported to HMRC within 60 days of completion and the capital gains tax paid within the same time frame. If the landlord does not have sufficient funds elsewhere to meet the capital gains tax liability, consideration could be given to selling the property to the child for an amount equal to the capital gains tax. Although there will be some consideration here, the gain is still worked out by reference to the market value as the connected person rules apply. The child’s base cost for capital gains tax purposes is the market value of the property. If the landlord lives for at least seven years after the date of the gift, it falls out of the estate for IHT purposes. Here the landlord will have paid capital gains tax at a maximum of 24%, whereas if the property had been passed on at death, IHT would have been payable at the rate of 40%. If the landlord does not survive seven years, IHT will be payable. Taper relief applies to reduce the rate of IHT on the gift (where it is not sheltered by the nil rate band) if the landlord lives for at least three years from the date of the gift. However, if the landlord dies within five years of making the gift, the combined capital gains tax and IHT tax hit will be more than 40%. The maximum exposure is 64% if the person gives away the property paying capital gains tax at 24% and then dies within three years, triggering an IHT bill of 40%. Beware the GWR rules …
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July payments on account
July payment on account and what to do if you need to reduce it Taxpayers within Self-Assessment must make payments on account…
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Simple assessments
Simple assessments – What are they? In the last few months, some taxpayers who possibly have had no dealings with HMRC previously have been receiving letters headed ‘Simple…
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