landlord tax return

What is the procedure for filing a landlord tax return?

Whether you’re a landlord, a small company owner, or a sole trader, the Self-Assessment procedure is basically the same.

  1. Sign up for a Self-Assessment

To get started, you’ll need to sign up for Self-Assessment. If you haven’t already done so, you must register for Self-Assessment by the 5th of October in the tax year following the year in which you began collecting rental revenue.  If you don’t register by the deadline, HMRC may levy a penalty, so be certain to do so as quickly as possible.

When you register, you should be given a user ID and password for the Government Portal. You may use this to create your own personal tax account, which will allow you to handle your taxes online. Once you’ve registered, you may submit your landlord tax return by filling out the Self-Assessment tax return form online or on paper. Making Tax Digital, on the other hand, means that paper tax returns will gradually be phased away.

  1. Keep track of the deadlines for landlord tax return

Each financial year, the deadline for filing your landlord tax return is generally 31 October for paper returns and 31 January for online filings. The deadline coincides with the deadline for filing online Self-Assessment tax returns. There are consequences for missing deadlines, so don’t put off getting yours done.

  1. Sort through your data

It’s vital to maintain track of all of your income and spending so that you can simply locate them when it’s time to file your tax return. According to HMRC, you must keep track of the dates you rent out your property. For instance: All of your money spent and the rent you received. As per HMRC you need to preserve the lease or letting contracts, rent books, receipts, invoices, bank statements, mileage logs, and the cost of the car used for property business and its CO2 emissions for your records.

You also need the costs of any additional capital goods utilized in the property for furnished vacation lettings and commercial premises. Moreover, you must have all the papers pertaining to the purchase of the property.

The software will store much of this information; for instance, accounting software can manage and handle your records for you. You’ll also need your UTR number, which you’ll receive when you apply for Self-Assessment. It’s generally printed in HMRC correspondence about your tax return, but write it down somewhere secure so you can access it quickly when the time is right.

  1. Calculate your landlord’s tax deductions

You can deduct variety of costs from a landlord tax return. These can be deducted from your overall taxable profit. Some common charges are property repair and maintenance expenditures, as well as the replacement of household objects. You can also claim for leasing agent fees, fees for accounting and renting agents, insurance for landlords, and operating expenses. Furthermore, service charges, ground rent, cleaning fees, and advertising expenditures are all included as well.

Mortgage interest tax assistance has been decreased to 25% for 2019-20 and will be nil for 2020-21. It has been replaced with a 20% tax credit on mortgage interest payments.

  1. Complete the landlord tax return

When you fill out your landlord tax return online, the HMRC system reacts to the information you give, eliminating parts that aren’t applicable. It will inquire as to the source of your income, customizing the return to your specific circumstances.

Landlords in the United Kingdom will need to fill out the UK property component, which will notify HMRC about:

  • Rental revenue and other receipts from land or property.
  • Earned money by renting out furnished rooms in your own house.
  • Premiums from land leases in the UK.

 

  1. Payment of your tax

HMRC will compute your tax bill and send it to you. You may check how much you owe if you file online by going to ‘View your calculation.’ The fastest ways to settle your tax due are as follows:

  • Banking through the internet or by phone
  • Chapters (Clearing House Automated Payment System)
  • Online, you can pay with a debit or corporate credit card (personal credit cards are not accepted).
  • At your financial institution or building society
  • You can also pay by Bacs, check, or Direct Debit, although these methods take longer to process.

It’s critical to pay your account as soon as possible since there are consequences for failing to do so.

 

Changes in the tax code for landlords

Government announces the landlord tax adjustments. While we’ve tried to provide a comprehensive list of everything you need to remember for your tax return, the actual amount you owe will be determined by your unique circumstances and how things evolve in the future.

5 Reasons You Haven’t Received the UK Tax Refund Yet

Is your tax refund taking ages to arrive? If you’ve filed your tax return electronically, you should keep calm and wait for at least 21 days. According to the Internal Revenue Service IRS, the average time for a UK tax refund is around 21 days. However, if you are waiting for more than 21 days to get your tax refund amount– you should read this blog.
Before getting to the reasons why your tax refund is delayed, you should check your refund status online. The IRS has a dedicated webpage, “Where’s my refund?” for checking UK tax refund status. Go on to this web page to check your refund status. If it doesn’t help as you don’t get enough information on it, you can always call the IRS to get every detail.
DISCLAIMER: You should only call IRS for your UK tax refund if,
• It’s been more than 21 days, and you haven’t received your tax refund.
• The ‘Where’s my refund?” webpage asked you to do so.
6 Reason why your tax refund is delayed
There are several reasons for the delay in your UK tax refunds. It may be because of your mistakes when filing your return or slow processing at IRS. Still, there can be many reasons you haven’t received your tax return yet. Let’s dig deeper to know about the 6 most common reasons for the delay in tax refunds.
A Note: Manually filing your tax return is obsolete and very slow. You should always file your tax return online; it’ll also help you get your tax refund quicker.
1. Errors in your tax return
Any type of errors or omissions in your tax return can cause a delay in your tax refund. The tax return with an error is sent for human review to get it corrected. In case your tax return had some errors, the UK tax refund process could be terminated until errors are corrected. It means you will have to wait for several days or weeks to get your tax refund.
2. Filing an incomplete return
If you’ve mistakenly filed an incomplete return, your tax return will go under review. As a result, the process of your tax return will be halted. The IRS employees will reach out to you with a directive to complete your return or file it again. You can experience a delay in getting the tax refunds until your request is in process.
3. Fall prey to tax fraud
Most people must be familiar with tax fraud. There are various types of tax frauds, including tax refund fraud, in which criminals claim UK tax refunds in your name. Considering the increasing number of tax refund frauds, we suggest you should do some checks as to why you aren’t getting your tax refund. In case you are a victim of tax fraud, immediately report to IRS authorities.
4. Incorrect bank account details
A typo in your bank account number can result in the transfer of a refund to another account. You must be very careful when entering bank details for direct deposit of your tax refund.
5. Altered tax return details
According to new IRS rules, the taxpayers have to request approval to alter previous tax return details. If you have altered your tax return details to get a tax refund, you’ll have to wait for three weeks until those alterations appear on the IRS system and another 16 weeks to get your tax refund.
6. Tax refund offset for liabilities
IRS can offset your tax refund against any state tax liabilities without any prior notice. If you owe any taxes to the state, you should not expect a tax refund. You are more likely to receive a notice from the federal bureau’s fiscal service. However, you reserve the right to dispute the debt.
Avoid these mistakes while requesting the tax rebate to ensure that you get the tax refunds on time.

Brexit Consequences: 5 Key Consideration to Prepare Yourself

With the start of 2020, the United Kingdom withdrew from the European Union EU. The withdrawal is popularly known as Brexit. Although the UK formally left the EU in January 2020, the existing trade, travel, and business rules were preserved until December 31, 2020. This 11 months period is the Brexit transition period in which both parties sat to decide future plans. After months of considerations, the EU and UK signed an agreement consisting of new terms and conditions for UK and EU nationals, imposed from January 01, 2021.
The Brexit consequences are still unclear for many of us. The UK and the EU are currently coping with the pandemic as a top priority; that’s why things are quite the same yet. However, there will be visible Brexit consequences in travel, trade, and business policies in the future. So, it is vital to be mindful of 5 key considerations to prepare yourself for the post-Brexit consequences.
1. Custom Compliance
Businesses operating across the EU and UK will be required to fulfill additional custom compliance obligations like custom declarations and documentation to import or export goods in the post-Brexit era. In the case of goods imported to the UK from the EU, the businesses are exempted from import declaration and associated tax obligations until July 1, 2021. The EU imposed its new terms and conditions from January 1, 2021.
2. Custom Duties
After Brexit, the UK and the EU have imposed separate tariff policies. The UK Global Tariff (UKGT) and Most Favored Tariff (MFN) substituted EU common external tariff MFN. The new tariff rates are applicable to all UK imports except the goods included in Free-Trade-Agreement (FTA). If your goods comply with the rules of origin set under FTA, the preferential custom duties will apply to them as Brexit consequences.
Import VAT is now applicable to import-export of goods to and from the UK & EU. The businesses registered with UK VAT must use the Postponed VAT accounting system to file import their VAT return.
There are also specific VAT Law changes for particular businesses and services. In the case of travel businesses, the Tour Operator’s Margin Scheme (TOMS) is revised, making the margin on EU holidays VAT-free. And for UK business-to-consumer (B2C) services operating in the EU, the EU Mini One-stop Shop Scheme (MOSS) is no longer applicable. Similarly, the VAT return laws are also changed for the UK’s financial service providers in the EU, translating to increase VAT.
3. Corporate Tax and EU Directives
UK is not a part of the EU anymore. It means the EU Interest and Royalties Directive and Parent-Subsidiary Directive will not apply to the UK registered companies. Consequently, the withholding tax on dividends, interests, and royalty payments depends on UK laws and regulations or any international agreement.
Likewise, the non-EU companies, including companies from the UK, will not be entitled to certain tax exemptions or reliefs. As a result of Brexit, the UK companies should consider the following points,
• They may not be able to consolidate with EU resident companies for tax purposes.
• Tax liabilities may also result after the termination of existing consolidations.
• US double tax treaties (DTTs) are also terminated for UK-based companies resulting in increased US withholding tax.
4. Northern Ireland
The UK and EU authorities have enacted separate laws in Northern Ireland. Custom compliance and documentation are easier and convenient to handle in the post-Brexit landscape. Although Northern Ireland comes in UK customs territory, the EU rules are imposed for goods while the services are excluded and subjected to UK rules. The UK government has also started a trader support service (TSS) that will help businesses comply with EU rules and regulations.

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6 Common Accounting Mistakes that Small Business Accountants owners Should Avoid

 

As entrepreneurs or small business owners, you should not manage everything without Personal Accountants. The international survey found that 68% of small business accountants owners want to do all tasks with no plans. This poses the risk of losing your hard-earned money. When you realize that your business is not earning enough revenue to cover operational expenses, it will be too late to fix things.
Here are six common accounting mistakes that you should avoid while establishing being a small business owner.
1. Not Hiring an Experienced Finance Professional
You should hire a bookkeeper or professional Certified public accountants for your small business. They will manage your bank accounts, expense tracking, tax planning, and staying on top of payroll, typically on industry-standard accounting software.
Check the license of your accountant to verify that he is a professional Certified public accountant.
2. Not Following Regular Business Expenses
When records management is not proper, more problems come in the way of a growing business, and accounting loses its effectiveness.
Improper financial tracking eventually costs you a lot.
Your accounting system should record every transaction accurately to estimate the progress and success of small business owners’ strategies.
In a joined system, the software attaches multiple financial transaction-related functions that small business owners engage in, including but not limited to tracking bank deposits and withdrawals, paying bills, cutting paychecks, invoicing clients to make all the transactions automatically.
3. Using the Same Bank Account For Personal and Business Transactions
If small business owners and managers don’t have a separate bank account for their business and home, that’s not a good strategy.
Mixing up financial accounts could be a big headache when tax time comes around and, it can create a problem to sort out your personal from business transactions.
Open a separate business bank account apply for a business credit card or, set aside business receipts to avoid a problem while applying for a loan.
4. Fail to Manage Bills
For your business expenses, payroll, and other needs, cash flow is necessary to manage the business activities.
Small business owners should begin invoicing their customers instantly after fulfilling their end of the transaction to tune up their billing management.
5. No Planning for the Tax Period
The tax software is the best for making a simple tax return. It could be the best solution for small business owners looking to save money on an accountant.
Some small business owners do not organize the receipts and documents required to file correct tax return services. They do not arrange their papers in the other 11 months of the year.
The best strategy is to avoid errors and omissions by ensuring that your business uses an accounting system. You can also opt for hiring a qualified tax professional to check in the accounting system periodically.
6. Failing to Classify Employees Properly
If a small business accountant’s owner fails to classify an employee, it means that the state and federal governments miss out on payroll taxes.
To avoid misclassifying employees, determine an employee or contractor by the job they perform. Besides, consider how they are getting paid and what their involvement is with your company or business.
Once you have made that determination, make sure the workers fill out the correct documentation based on their classification.
The last and most important thing small business owners should go through is a tax record. The best strategy for all small businesses is to save the following documents for at least ten years:
● Payroll tax records
● Business tax returns
● Business ownership records
● Records from operations
● Current employee pieces of information
● Accountant records
So if you are going to start your business or running a small business, you should avoid all the mistakes. Such blunders can cause irreparable damages to your small business.

Business Tax: A Detailed HMRC Construction Industry Scheme Guide

If you are working in the construction industry, you will have to comply with various HMRC regulations that are particularly crafted for construction businesses. However, we have scoured a detailed HMRC Construction Industry Scheme Guide for beginners who need clear and concise information. So, without further ado, let’s get started.

What is the Construction Industry Scheme (CIS)?
Construction Industry Scheme (CIS) is a tax deduction scheme for people, businesses, or public and private limited companies operating in the construction industry. It regulates the tax deductions on payments made to subcontractors by contractors. If you or your company have registered with HMRC Construction Industry Scheme as a contractor or subcontractor, it qualifies for the CIS scheme.
A client assigns construction work to a contractor; the contractor then hires a subcontractor to carry out the work on the ground.
The CIS applies to all types of construction work in the UK and within its territorial water belt. The definition of “construction work” includes site operations like demolition, repair, and rehabilitation. Some site operations are exempted from the HMRC Construction Industry Scheme, including medical and safety provisions and professional services of engineers, surveyors, and architects.
*Usually, the contractor decides whether the subcontractor qualifies for the HMRC Construction Industry Scheme and verifies that the subcontractor is registered with HMRC.

How does CIS work?
The CIS obligates the contractors to deduct tax on payments made to subcontractors. The tax deduction is a prerequisite for payments to subcontractors under the Construction Industry Scheme. Moreover, the business tax rates are determined according to the registration status of the subcontractor at HMRC.
In case the subcontractor also hires another subcontractor for construction work, he’ll be required to deduct tax (per CIS rules) on payment made to his subcontractor.
The subcontractor is free from all tax liabilities of HMRC once the taxes are deducted from his payments. The contractor is then required to keep the record of all CIS tax deductions and consecutively file them in the annual tax return. These tax deductions can be offset against your liabilities to National Insurance Contributions (NIC) or PAYE.
The process of filing CIS tax returns is made online since April 2016. These returns cannot be filed through papers, and if you are required to make any corrections or amendments, even if the returns are already filed, it can only be done online.
You are required to show your offset against liabilities on the P35 Employer Annual Return. The request for repayment of the same can be made in writing.

What are CIS business tax rates?
The tax deduction rate for unregistered subcontractors is 30% of the total payment. And the subcontractors registered with HMRC are liable to pay tax at a 20% rate. HMRC also have a criterion to determine whether a subcontractor is entitled to gross payment or tax deduction at the rate of 20%.
The criteria for gross payment include three tests:
1. The Business Test: HMRC checks if the business operates in the construction sector and its financial operations are carried out through the bank.
2. The Compliance Test: HMRC verifies the business has a proper tax background and that all the past liabilities are paid.
3. The Turnover Test: HMRC reviews the business’s turnover from the past 12 months, and if the business has an annual turnover less or equal to,
• £30,000 – for an individual business owner.
• £30,000 – for each shareholder in case of multiple owners.
• £100,000 – In total for five or more owners (From April 2016.)
It is eligible for gross payment. Otherwise, the business will be liable to pay tax at a 20% rate.

Why register as a subcontractor with HMRC?

You should register with HRMC for the benefit of your business. The tax deduction rate for registered and unregistered subcontractors has a difference of 10% – get yourself registered and pay less tax.

All You Need to Know About Self-Employment Income Support Scheme

All You Need to Know About Self-Employment Income Support Scheme (SEISS)

In response to the global pandemic’s wide-scale effects, the UK government came up with a scheme to help the self-employed. Under the ‘Self-Employment Income Support Scheme,’ self-employed get grants from the government to mitigate the pandemic’s effects. The main reason for introducing this scheme was to lower the burden for all the self-employed persons. The government has realized that the livelihood of such individuals had taken a massive hit due to Covid-19.
What’s The Purpose Of This Scheme?
The scheme aids the self-employed by giving them two grants for 3-month periods each. The government has already given two grants and extended to offer two new grant periods; Nov 2020 to Jan 2021, and Feb to Apr 2021.
Important Information About the Extension for SEISS
The UK government has decided to extend the project for six months, beginning from November 2020 to April 2021. Self-employed persons will get grants under the Self-employment Income Support Scheme in two installments; each will be for 3 months.
The third installment of the grant will be available for the period beginning 1st November and ending on 31st January. For this, the amount rewarded will equal 80% of the average profits earned through trading every month. It will be awarded in one payment that will include the amount worth 3 months’ profits. One can get a maximum amount of £7,500. The government bodies have increased the grant amount from 55% to 80% just to help residents of the UK.
Initially, this grant was proclaimed at 40% but has since risen to 80% for November. Hence, through this change, the aggregate grant level is set to 80% of profits earned through trading. However, from Feb to April 2021, the percentage rate is still under review.
Afterward, the fourth grant session begins on 1st February 2021 and ends on 30th April 2021. The government will announce the exact details and package percentage of the Self-employment Income Support Scheme after completing the previous ones’ review and analysis.
These grants will act as taxable income and are to be treated as such.
Eligibility Criterion for Coronavirus SEISS
For self-employed people, inclusive of those running a partnership will be eligible for the claims. However, they must meet a few requirements to qualify for the Self-employment Income Support Scheme.
It does not make a difference whether they took the first two grants of this scheme or not. What matters is that they should have been competent for those two grants to claim the upcoming ones.
The concerned self-employed person should clearly announce that they will continue trading during and after the situation gets better. Besides this, they should fit into one of the following two categories;
They are, at the moment, actively trading, but the situation has impacted them
The claimants were trading before the pandemic. But they are now unable to continue the operations as a result of the situation caused by Covid-19
Procedure to Claim SEISS
From 30th November, the next installment’s complete details will be provided by HMRC and its online services regarding the applications and procedure of claiming for the grant and relevant guidance on the GOV.UK website.
Once the applicants have completed the application, they will get the grans within 6 business days from the date they have submitted the claim. Apart from this, if you are racking your brain on calculations, HMRC has taken the hassle to its shoulders. The taxpayer or claimant doesn’t need to provide any additional information as the calculations will be done based on the applicant’s tax returns in the due year.
Taxpayers should create a new government gateway account or log in to an existing one to start the application process. HMRC has made the process simpler to ease the applicant through the process. Following this, HMRC has also warned the applicants to submit the claim themselves and not ask any accountant, agent, or advisor to complete the process on their behalf.

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VAT: Disbursement passed to the customers

VAT: Disbursement passed to the customers

EU nations utilize distinctive sorts of VAT rates namely standard, reduced, and special rates. When you make payments on behalf of your clients, for products or services received and used by them, then you may regard these payments as “disbursements” for VAT purposes. This implies that you don’t charge VAT on them when you make the invoice for the customer and they can’t even claim it back.

Disbursements: excluding cost from VAT

A payment made to providers in the interest of your clients is known as a “disbursement” on the off chance that you pass the expense on to your clients when you invoice them.

You may have the capacity to forget these payments from your VAT calculations since it’s the client, not you, who purchases and receives the goods or services; you’re simply acting as their mediator.

In order to treat the payment as disbursement you must apply the following:

  1. The products and services you paid for are notwithstanding the expense of your own services
  2. You must show the expense separately on your invoice
  3. You made the payment to the supplier on your customer’s behalf and acted as the middle person

It’s typically just a favorable advantage to regard any payment as a disbursement if the provider didn’t charge VAT on it, or if your client can’t reclaim the VAT.

What isn’t covered in Disbursement?

There are numerous incidental costs your business may bring about that must be incorporated into VAT calculations when you invoice clients. These incorporate things like voyaging costs and your very own postage and conveyance costs.

Costs that your business acquires itself when providing products or services to clients are not disbursements for VAT. It’s you who purchases the products or services for use in your very own business.

It’s dependent upon you regardless of whether you itemize costs like these on your invoices. In the event that you do show them independently when you receipt your clients they’re termed as recharges and not disbursements. However, you need to charge VAT on them whether you pay it or not.

Some examples of recharges include:

  1. A flight ticket that you purchase to visit a customer or to head out to a vocation, on the off chance that you recharge the expense to your customer you should charge VAT on the grounds that the flight was for you, and not for the customer
  2. Postage costs you acquire when you send letters to your clients are ordinary business expenses and you should include VAT on the off chance that you recharge them
  1. A bank exchange fee paid while exchanging cash from your business record to a customer’s record – despite the fact that the bank’s charge is excluded from VAT if you recharge the fee, you should charge VAT, since it was for an administration given to your business and not to your client

When a cost or mileage claim is recognized as billable, then you can make an invoice you simply have to select the expense option from the rundown to include it.

  • Record your Billing expense

When you record your expenses in either business expense paid for utilizing personal money or business expense paid directly from a business account you have to choose the agreement that will be charged for the cost. When you make your next invoice you can choose the billable expense to include.

  • Invoice your Billed expense

When you make your invoice you can click “add invoice line” at that point select ‘billable expense’ from here you will have the capacity to choose the cost you wish to charge your customer for. The equivalent applies when billing mileage, select the ‘billable journey’ alternative.

Records needed to keep for VAT

In the event that you pass on any disbursement to your clients and don’t charge VAT on them, you should keep proof, for example, arrange forms and invoices, to demonstrate that you were entitled to let items out of VAT count when you invoiced your clients.

You should likewise have the capacity to demonstrate that you haven’t asserted back the VAT on things you paid for your client’s behalf.

 

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