A Tax self return question please…

My wife is filling out her tax return (yes I’m aware it’s late in the day!)

I’ve been through it and it doesn’t make sense

Her tax from her job (school teacher) is correct….

She’s has put in her income from the rental of house she owns…. £8700

There were £2,000 in repair costs (all receipted)

It’s shows her taxable amount on the net position as £6,700 quite clearly - good

She’s nowhere near the £50k for 40% tax rate, so it should be 20% on the net position of £6,700 - ~£1,340

Yet…. It’s coming out as £1,800 for that tax year? (This does not include what they’d like her to pay on account for the next tax year)

What am I missing?

Thanks
Ben

Payment on account since the amount owed is more that £1000?

Edit: Ignore me. Payment on account for £1340 wouldn’t total £1800

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Originally Posted by Mr Tetley

Payment on account since the amount owed is more that £1000?

Edit: Ignore me. Payment on account for £1340 wouldn’t total £1800

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No…. With the payment on account it’s significantly more…. The £1800 is just for that single tax year

Are you sure the tax deducted on the salary is actually correct? You have isolated that part of it to check?

NI contributions as well as tax?

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Originally Posted by Gav

Are you sure the tax deducted on the salary is actually correct? You have isolated that part of it to check?

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Yes…

£12,570 personal allowance

Plus exactly 20% of the remainder of her salary was taken

It’s bang on

That was my first though too…

I’m really confused !

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Originally Posted by Dave E

NI contributions as well as tax?

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I didn’t check that…. I think it just showed tax?

Doesn’t the “view calculation” section show you the breakdown?

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Originally Posted by PhilT

Doesn’t the “view calculation” section show you the breakdown?

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It just shows the amount…. I could not see any breakdown as to how they got there ?

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Originally Posted by Wolfie

I didn’t check that…. I think it just showed tax?

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It has been years since I did a self-assessment, but I thought it also calculated NI contributions at the same time. You don't pay NI on account, though, it's only tax that they do you for that on.

What I would normally say is go through the whole of the return to check there is no duplication or any coding adjustment in the year like an underpayment brought forward

There is no NIC calculated on a self assessment tax return for employment income. On self employment income then yes.

Worth running it through taxcalc or similar? Relatively inexpensive way to run scenarios. I once had something similar where I had accidentally checked a box claiming non dom status which removed personal allowances. Devil of a job to find it.


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Originally Posted by Wolfie

It just shows the amount…. I could not see any breakdown as to how they got there ?

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I think you can save/print/view the calculation on the penultimate page prior to submission.

Just a couple of thoughts:

Could the difference be penalty interest? As I understand although the return needs to be in by Jan 31st, any tax payment was due by December 31st?

Has she ticked a box or previously claimed the "property allowance" of £1,000? If so then the £2,000 of repairs and maintenance cannot be claimed as well and deductions are limited to the £1,000 property allowance.

Are the expenses all marked down as general maintenance and repairs (as opposed to capital expenditure on improvements which are disallowable as deductions)?

Is her personal allowance right, or has it changed?

Bit stressy so close to the deadline, and chances of getting through on the phone to HMRC Monday or Tuesday would be close to zero as they'll be the busiest two days of the year for their call centres. Even if the payment ends up being higher than it should be, at least such can be resolved afterwards and refunded or adjusted through her 23/24 tax code.

Is there a mortgage on the property? Interest is treated in an odd way for buy-to-let. Interest is only relieved at 20% so the profit excl interest may push the taxable amount into higher rate.

No NI on buy-to-let income.

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Originally Posted by Halitosis

Just a couple of thoughts:

Could the difference be penalty interest? As I understand although the return needs to be in by Jan 31st, any tax payment was due by December 31st?

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No; both submission and payment are due by Jan 31st

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Originally Posted by Dave+63

No; both submission and payment are due by Jan 31st

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I stand corrected - thanks.

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Originally Posted by Halitosis

I stand corrected - thanks.

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Happy to oblige. [emoji106]

I’ve just completed mine today.

Something sounds wrong and the easiest way to check is to view the tax calculation.

Don’t forget to claim the £312 working from home allowance (assuming she has done some work from home)


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Check the calculation. Can't be that complicated

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Thanks all…. I’ve checked thr calc. again and again…. It just doesn’t make sense!

No working from home as a school teacher

I’m a bit confused around the ‘show the calculation figure’ feature? Maybe that’s something I’ve missed?

Fortunately a kind soul has offered to have a look Monday… Just to double check it and I’m very grateful….

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Originally Posted by Wolfie

Thanks all…. I’ve checked thr calc. again and again…. It just doesn’t make sense!

No working from home as a school teacher

I’m a bit confused around the ‘show the calculation figure’ feature? Maybe that’s something I’ve missed?

Fortunately a kind soul has offered to have a look Monday… Just to double check it and I’m very grateful….

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This usually happens on tax returns and it always ends up being more tax payable than any of us planned...but they are usually correct too. The calculation system is fairly robust so if it is 'not correct' it would usually be something you have entered incorrectly (or ticked as highlighted above).

Most of the common issues have been mentioned above. If there is any mortgage interest, as above it is treated differently, if the rent takes her above £50k, even if the interest brings her back below, that could possibly be it (although not sure it would make you pay so much more).

Hope you get it sorted.

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Originally Posted by Boss13

This usually happens on tax returns and it always ends up being more tax payable than any of us planned...but they are usually correct too. The calculation system is fairly robust so if it is 'not correct' it would usually be something you have entered incorrectly (or ticked as highlighted above).

Most of the common issues have been mentioned above. If there is any mortgage interest, as above it is treated differently, if the rent takes her above £50k, even if the interest brings her back below, that could possibly be it (although not sure it would make you pay so much more).

Hope you get it sorted.

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Thank you - it’s £400 off what I calculated, so if worst comes to the worst we suck it up! But, I’d rather not if it’s simply an error

I don’t believe there is even a section to enter mortgages now? It’s only a relatively small amount, but we haven’t entered it into the calculation

Her combined incomes is not even close to £50k, so definitely not that

Self employed tax normally works out at 20%, plus around 8% national insurance - so deductions of 28% would be correct (unless exempt from NI contributions)

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Originally Posted by Wolfie

I don’t believe there is even a section to enter mortgages now? It’s only a relatively small amount, but we haven’t entered it into the calculation

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It’s well hidden! Box 44.

https://assets.publishing.service.go...5_2022__1_.pdf

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Originally Posted by David_D

It’s well hidden! Box 44.

https://assets.publishing.service.go...5_2022__1_.pdf

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Ah…. Thank you

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Originally Posted by Wolfie

I’m a bit confused around the ‘show the calculation figure’ feature? Maybe that’s something I’ve missed?

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I was helping a friend this week and the option to save/print/view the calculation is given on the penultimate screen I think ie the last 'save' screen before submission.

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Originally Posted by Reeny

Self employed tax normally works out at 20%, plus around 8% national insurance - so deductions of 28% would be correct (unless exempt from NI contributions)

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No NI on rental income, unless it's classed as a business, which means all of the following apply, it's your main/sole income, multiple properties, you buy houses to rent out (so not your old home or inherited)

Mortgage interest is definitely there on the online form, filled mine in a couple of weeks ago, think it's titled something like 'financial costs'. There's also maintenance costs, insurance (buildings, boiler cover etc), management costs (agent fees)

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Originally Posted by Wolfie

Thanks all…. I’ve checked thr calc. again and again…. It just doesn’t make sense!

No working from home as a school teacher

I’m a bit confused around the ‘show the calculation figure’ feature? Maybe that’s something I’ve missed?

Fortunately a kind soul has offered to have a look Monday… Just to double check it and I’m very grateful….

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You can claim WFH for the landlord property part iirc (unless you have an office for doing all your admin work relating to the property).

Edit: check the view calculation right at the end, that will show how they worked it out. If you need help give me a shout, not an accountant but been doing SA for a while now.

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Originally Posted by Wolfie

My wife is filling out her tax return (yes I’m aware it’s late in the day!)

I’ve been through it and it doesn’t make sense

Her tax from her job (school teacher) is correct….

She’s has put in her income from the rental of house she owns…. £8700

There were £2,000 in repair costs (all receipted)

It’s shows her taxable amount on the net position as £6,700 quite clearly - good

She’s nowhere near the £50k for 40% tax rate, so it should be 20% on the net position of £6,700 - ~£1,340

Yet…. It’s coming out as £1,800 for that tax year? (This does not include what they’d like her to pay on account for the next tax year)

What am I missing?

Thanks
Ben

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I know it doesn't help now but my accountant does mine & the wifes SA & return and charges me £50 for doing it, it makes life so much easier and less stressful. may be worth looking for an one man band accountancy for help next year.

Steve

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Originally Posted by Steve B

I know it doesn't help now but my accountant does mine & the wifes SA & return and charges me £50 for doing it, it makes life so much easier and less stressful. may be worth looking for an one man band accountancy for help next year.

Steve

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Really? That’s amazing…. Will have peak about then, as they’d pay for themselves I’d guess! I don’t suppose they’d take me on remotely would they?

I got it in yesterday and paid…. I’m having a chat Friday to understand why it doesn’t appear to be right and to review what to do next…. All very odd! As the payment seemed strange too!

My online return ignores the tax I have pre-paid in advance so always over estimates the amount owed on the day my return is inputted. It generally takes about 7 days before their internal system calculator actually runs the numbers and works out the real amount owed.

Could it be something like that?

It isn't very helpful as is clever enough to automatically input some data on the screen calculation, but then ignores other inputs - which is very odd.
I now submit my figures at least a couple of weeks before they are due so that I can log in again later and see what amount is ACTUALLY owed.

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Originally Posted by Steve B

I know it doesn't help now but my accountant does mine & the wifes SA & return and charges me £50 for doing it, it makes life so much easier and less stressful. may be worth looking for an one man band accountancy for help next year.

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He must owe you some big favour as that’s probably close to 10% of a market rate for two SA returns plus all the associated admin and communications.

I’m assuming that your accountant is appropriately competent but would genuinely advise anyone looking for an accountant not to base their expectations on your experience.

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Originally Posted by Estoril-5

You can claim WFH for the landlord property part iirc (unless you have an office for doing all your admin work relating to the property).

Edit: check the view calculation right at the end, that will show how they worked it out. If you need help give me a shout, not an accountant but been doing SA for a while now.

Sent from my moto g(8) power lite using Tapatalk

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I heard of a case where costs of a home office had been offset against income tax and the tax man took an interest in the capital gain when the house was sold. They judges that a portion of the value of the house had been claimed against his business and therefore that part was not exempt from CGT.

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Originally Posted by Toodlepip

I heard of a case where costs of a home office had been offset against income tax and the tax man took an interest in the capital gain when the house was sold. They judges that a portion of the value of the house had been claimed against his business and therefore that part was not exempt from CGT.

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Extreme but theoretically possible.

Not sure anyone should be claiming more than a very token amount for using their home for the work involved with a single let property. What proportion of the home is used and for how many hours a year? That’s the starting point, I think.

Probably literally a day too late to comment. The regulations around taxable relief changed on Rental properties. I wonder if where you entered the £2k was correct and it actually deducted?

If the £2k deductible didn’t come off the Rental income the calculation seems more accurate to the amount due.

Hope helpful

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Originally Posted by Toodlepip

I heard of a case where costs of a home office had been offset against income tax and the tax man took an interest in the capital gain when the house was sold. They judges that a portion of the value of the house had been claimed against his business and therefore that part was not exempt from CGT.

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Only applicable where parts are used exclusively for business so ensure some domestic use and you're fine.

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Originally Posted by Gullers

Probably literally a day too late to comment. The regulations around taxable relief changed on Rental properties. I wonder if where you entered the £2k was correct and it actually deducted?

If the £2k deductible didn’t come off the Rental income the calculation seems more accurate to the amount due.

Hope helpful

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Could be the answer, but when I reviewed it with someone has far more insight than me, it didn’t make any sense! I’m doing a further review Friday…

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Originally Posted by deepreddave

Only applicable where parts are used exclusively for business so ensure some domestic use and you're fine.

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I wasn’t sure about this one, but it seems like a stretch that my wife used her home to manage a single property and therefore needed relief…. It’s a tiny amount of admin each year…

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Originally Posted by Wolfie

I wasn’t sure about this one, but it seems like a stretch that my wife used her home to manage a single property and therefore needed relief…. It’s a tiny amount of admin each year…

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My comment refers to the possibility of restricting private residence relief on sale of the home if part was used exclusively for business so won't be applicable in your circumstances.
You're right that any home office expenses claim would be tiny if only say one hour admin per week/month as it's based on the hours of business use of the space/room as a fraction of the rooms in the home and the running costs. You can also claim for any 'wholly and exclusively' business expenses (or reasonable proportion thereof in practice).

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Originally Posted by David_D

He must owe you some big favour as that’s probably close to 10% of a market rate for two SA returns plus all the associated admin and communications.

I’m assuming that your accountant is appropriately competent but would genuinely advise anyone looking for an accountant not to base their expectations on your experience.

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I wasn't going to recommend anyone, it was just that if you use an accountant who knows what they are doing it doesn't take a lot of time (especially as simple as what the OP needed). My accountant, Yes he is a professionally qualified accountant, he works on his own from his house for a number of businesses. Our SA's arent complicated, just our earnings from our PAYE jobs and our dividends from our LTD business that I run. Gives peace of mind and takes another hastle away. He also does my VAT and year end accounts.

Steve

I use TaxCalc software to do mine every year.

Reading posts here made me wonder - do I really need this, is it easy enough to do w/o this or similar software?

So, my wife’s tax bill was inflated beyond what I was expecting as student loans clawed back some money based on the money she made on the property - fair enough!

However, I’ve paid a massive chunk less as I hadn’t appreciated that I could offset the £1.5k interest on the mortgage! So, all in all I’ve had a better result than I was expecting…

A big thanks to a very kind member here who helped with the review…. It was greatly appreciated!

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Originally Posted by Wolfie

So, my wife’s tax bill was inflated beyond what I was expecting as student loans clawed back some money based on the money she made on the property - fair enough!

However, I’ve paid a massive chunk less as I hadn’t appreciated that I could offset the £1.5k interest on the mortgage! So, all in all I’ve had a better result than I was expecting…

A big thanks to a very kind member here who helped with the review…. It was greatly appreciated!

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You offset the interest of a rental property? My understanding (and my calculations) are on the basis that tax is calculated on the income from the property.

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Originally Posted by jwillans

You offset the interest of a rental property? My understanding (and my calculations) are on the basis that tax is calculated on the income from the property.

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Interest isn’t now deductible from profits but there is a “tax reducer” of 20% of the interest given.

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Originally Posted by Wolfie

However, I’ve paid a massive chunk less as I hadn’t appreciated that I could offset the £1.5k interest on the mortgage! So, all in all I’ve had a better result than I was expecting

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That’s good then. What about prior years?!

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Originally Posted by Wolfie

However, I’ve paid a massive chunk less as I hadn’t appreciated that I could offset the £1.5k interest on the mortgage!

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Glad it all worked out [emoji1303] surprised you overlooked the mortgage interest credit as think it was mentioned by David at #15 so make sure you consider his latest comment ^^^^ if this wasn't the first year of letting.

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Originally Posted by David_D

Interest isn’t now deductible from profits but there is a “tax reducer” of 20% of the interest given.

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Yep…. Just 20% on the £1.5k

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Originally Posted by David_D

That’s good then. What about prior years?!

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I’ll double check, but previously there was a clear place to put if memory serves me well

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Originally Posted by deepreddave

Glad it all worked out [emoji1303] surprised you overlooked the mortgage interest credit as think it was mentioned by David at #15 so make sure you consider his latest comment ^^^^ if this wasn't the first year of letting.

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It just wasn’t clear where to put it until I was advised…. Previously there was a very clear section and I knew the rules had changed

Will double check though