Tax Return ‘season’
NOVEMBER 2018
The increasingly darker afternoons and the onset of some poor weather as November comes to a close is a reminder that we are now deep into Tax Return ‘season’. It’s ironic that the gathering gloom and the depths of winter coincide with the task of completing and filing the annual Tax Return.
Reverse psychology, however, means that after this has all been done by 31 January, we will have broken the back of winter and the amount of daylight and (hopefully!) better weather should be starting to kick in.
The tax team at Davies Tracey process around 900 Self-Assessment Returns for individuals, partnerships and trusts and is hard at work as we hit December providing an efficient, timely and personable service.
We will be contacting clients whose Return is outstanding to go through the information that is required and, increasingly, this is by email and telephone rather than by letter.
We are conscious that, for many, we might be imparting bad news about how much tax is payable at the end of January (and possibly on 31 July also) and so would much prefer to do this as far ahead of 31 January as possible.
For others, there might be the prospect of a tax reclaim, always guaranteed to put a smile on one’s face!
We will also highlight two relatively recent tax developments that might have an impact on the Return process for clients this year.
The first is an extension of the restriction to let property mortgage interest tax relief that started in April 2017.
We’re now into year two of the move to restrict tax relief to the basic rate by 2020; this is on residential properties and does not apply to furnished holiday lets or commercial properties
For the tax year ended 5 April 2018 (the year we are filing now), 50% of the mortgage interest will be fully allowable at the 40% higher rate or additional rate of 45% with the remaining 50% being relieved at the basic rate of 20%.
As part of this process, it’s possible that your taxable income will increase and potentially push you into a higher rate of tax (40%/45%) reduce your personal allowance (for income over £100,000) or affect entitlement to Child Benefit.
The second point concerns the introduction from April 2017 of an annual tax-free allowance for property or trading income. If you have both types of income you can get a £1,000 allowance for each.
If your gross property income is less than £1,000, using the allowance means that this income does not have to be declared on a Tax Return. If the income is more than £1,000 then it might be more beneficial to claim the allowance instead of deducting actual expenses.
The same rationale applies to trading income from self-employment or the provision of casual services. Clearly, there might be circumstances where it would be beneficial to claim actual expenses instead of the allowance and to file a Return even if your income is £1,000 or less; for example if you incur a trading loss and wish to claim tax relief against other income.
If you would like to discuss any part of our tax services, please feel free to give me a call (01642 606003) or email ian.kelly@daviestracey.co.uk