Tax return deadline day is just around the corner, the Residential Landlords Association (RLA) has warned all investors.
Although it is claimed that 8,000 taxpayers took a break from the festive period to file their tax return on either Christmas Day or Boxing Day, if you haven’t yet completed your self-assessment tax return, you must move fast. By 31st January 2017, you will need to file your tax return and pay any tax owed to avoid penalties.
In addition, if HM Revenue & Customs (HMRC) requires payments on account towards the 2016/17 tax year, then this first payment is also due by 31st January 2017.
Although 30th December has passed, it is vital to note this date for your next tax return, as this is the date to complete your tax return if you would like your outstanding tax collected through your PAYE notice. However, there are conditions to meet in this circumstance, such as the liability being less than £3,000.
Landlords letting fully furnished properties must also be warned that the tax return due by the end of this month is the last that you can claim for the automatic Wear and Tear Allowance. Last April, HMRC abolished the 10% allowance, therefore affecting tax return periods form the 2016/17 year onwards.
However, you will still be able to claim for the replacement of moveable furnishings from the 2016/17 tax return deadline period onwards, unless you rent out furnished holiday lets, which have a different tax system. It is important to note that it is only the replacement cost that is claimable, not the original cost. For example, if you replaced a washing machine, this may be claimable, but if you purchased a new tumble dryer that has never been in the property before, this will not be claimable. However, if the tumble dryer was replaced in a few years’ time, it would be claimable.
The replacement must be like-for-like or the nearest modern equivalent, with HMRC also allowing you to claim costs incurred when you dispose of the previous furnishing. However, you must also account for any proceeds received for the replacement of furniture.
Recent news has focused on the forthcoming reduction in tax relief on finance costs for landlords. While this four-year phased introduction begins in April this year, it is worth pointing out that this is the 2017/18 tax year, and so the change will only be applicable for the tax return due by 31st January 2019 onwards.
Nevertheless, the RLA insists that it’s extremely important to review your individual position in the sector and take any necessary action as part of your overall strategy.
There is a high number of expenses that can be deducted from your rental income when calculating your taxable profit, but you should seek professional advice if you are in any doubt. In particular, repairs can often be a complex area, as sometimes they can be deemed an improvement cost, and therefore not claimable against rental income, but instead against potential capital gains on future sale.
To keep on top of your financial obligations this year, put the following dates in your diary:
31st January 2017
- Online filing for your 2015/16 self-assessment tax return deadline
- Deadline for paying your 2015/16 self-assessment tax liability
- Deadline for paying your first payment on account towards the 2016/17 tax year, if applicable
28th February 2017
- The tax return deadline to avoid paying a penalty of 5% of the tax owed
6th April 2017
- Four-year introduction of the reduction in tax relief on finance costs begins
30th April 2017
- The deadline for filing your self-assessment tax return to avoid the £10 per day penalty
31st July 2017
- Second payment due towards the 2016/17 tax year for those liable to payments on account
- Deadline to renew tax credits, if applicable
5th October 2017
- The latest date you should register for self-assessment if you are a new landlord for the 2016/17 tax year
31st October 2017
- Deadline to file your 2016/17 self-assessment tax return if you opt for paper filing
30th December 2017
- Deadline to file your 2016/17 tax return online if you wish to add your self-assessment tax liability to a future tax code, assuming you meet the criteria