As a long-established world financial centre, the UK enjoys a unique political and economic environment, which has attracted large number of people from all over the world every year who move to the UK to seek better economic conditions. Moreover, with limited land resources available for development and cumbersome administrative regulations controlling land, the UK’s property market has long been in a state of undersupply.  Therefore, many investment enthusiasts are keen on investing in UK properties. But beware! There are risks involved! Just like the protagonist of the story we’re about to tell today, who after ten years of property investment, unfortunately ended up with a negative asset! He even considered returning the house keys to the bank to escape the loan… 1. Is a rental property investment still a negative asset after 10 years? Mark (an alias) and his wife purchased a property in 2007 for £155,000 and paid a deposit of £35,000, leaving a mortgage of £120,000. However, soon after, the economic recession hit, and its value plummeted to £75,000! That’s a direct loss of £80,000! Initially, they were on an interest-only mortgage, but three years ago, the couple switched to a repayment mortgage in an attempt to reduce their debt. During this time, they had rented out the property for £500 per month, trying to repay the mortgage with the rent. However, as the bank mortgage interest rates rose to 8.74% (£949.07 per month), the monthly rent was insufficient to cover the debt. Additionally, because the property was rented out, the couple had to rent a separate place for themselves, gradually leading to financial strain, and the property becoming a negative asset. Some might ask, why not switch to a lender with lower rates? Because they’re in a negative asset situation, they were not able to switch lenders. Mark felt deeply distressed about this and even considered returning the keys to the bank to avoid paying the loan.. 2. Does returning the keys to the bank mean no more repayments? Originally, Mark hoped to make a fortune through property investment. However, with the economic downturn causing property depreciation and the rise in bank interest rates, Mark gradually found it impossible to bear the high mortgage pressure. So, if he returns the keys to the bank, can he stop repaying the loan? Unfortunately not! The property Mark resides in is located in Northern Ireland, where property prices peaked in 2007 but sharply declined from 2008 onwards. Therefore, Mark missed the best investment opportunity. Currently, they still have a £94,000 loan remaining, and returning the keys to the bank will not absolve them of any outstanding responsibilities. With the mortgage exceeding the property value, many lenders may offer alternative solutions to existing clients. They might offer slightly lower rates, but this may mean agreeing to early repayment fees. 3. Property investment tips In the long run, the value of UK real estate is still steadily increasing. Even amidst market fluctuations, real estate remains one of the reliable investment options for the future. If you’re looking to make quick money, the real estate market might not be suitable for you. However, if you engage in it for the long term, real estate can provide stable income and healthy returns over time. The key is to make wise purchases, conduct research to find areas with strong demand and price growth opportunities. Let’s take a look at some tips for property investment that you need to pay attention to! 1. Acquire all information about the UK real estate market and various investment strategies Before investing, analyse the latest market trends and forecasts, or consult professional tax experts to determine the best investment areas and property types. 2. Develop an investment plan Determine your investment goals and the strategies you want to adopt Identify your budget, preferred locations, and property types Develop a timeline for finding and purchasing investment properties to keep yourself on track 3. Find suitable investment properties Look for properties with strong rental demand and capital appreciation potential Negotiate the best price to maximize your investment return 4. Prepare investment funds Explore your financing options to determine whether a mortgage or cash is suitable for you. Compare rates and terms to find financing that fits your budget and investment timeline. 5. Effectively manage property assets If you decide to invest in buying property for rent, you’ll need to devise appropriate marketing strategies to attract quality tenants, handle the leasing process, and oversee ongoing maintenance and repairs to keep the property in good condition. In conclusion, the three key elements of property investment are: Finding properties with higher potential returns Sensible investment Effective management This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Many savers are currently benefiting from elevated interest rates compared to the record lows seen in previous years. You may therefore have wondered – do you need to pay tax on any interest earned? Taxes on savings In general, the principal of any savings is not taxable – only the interest earned from savings is taxable. However, HMRC provides several different tax-free allowances: the Personal Allowance, the savings starting rate, and the Personal Savings Allowance.  These allowances are usually allocated for each tax year (April 6th to April 5th of the following year). You would usually only start paying taxes on any taxable income which exceeds these allowances.  The specific amount you pay may also depend on your other income. The Personal Allowance Most people are eligible for a certain amount of tax-free income before they need to pay income tax.  This is known as the basic Personal Allowance. For the tax year 2023-24, the Personal Allowance rate was set as £12,570.  This will remain the same for 2024-25.  If your wages, pension or other income does not exceed this allowance, you can use it to earn additional tax-free savings income from interest. What is the starting rate for savings? In each tax year, you can earn up to £5000 of interest without paying tax – this is known as the ‘starting rate’. However, the more income you earn from other sources (e.g. wages or pensions), the lower your starting rate for savings.  For example: If your income from other sources reaches or exceeds £17,570, you will not be eligible for the starting rate If your income from other sources is less than £17,500, your starting rate is £5000 but will decrease by £1 for each £1 that you exceed the Personal Allowance (£12,570). So, how does this work in practice? If your income from wages is £16,000 and your savings interest is £200: Your Personal Allowance is £12,570 Your remaining wage income after deducting the Personal Allowance is £3430 (£16,000 – £12,570) Your starting rate is therefore reduced by £3430 (£5000 – £3430), which is £1570 This means that you don’t need to pay any taxes on the £200 earned in interest How does the Personal Savings Allowance work? The Personal Savings Allowance (PSA) allows you to earn up to an additional £1000 of tax-free interest on top of the starting rate. The PSA varies depending on your income tax band: Basic rate: £1000 Higher rate: £500 Additional rate: £0 Additional rate tax-payers are considered high-income earners and are not eligible for the PSA. Therefore, if your annual income exceeds £125,140 (2023-24 & 2024-25), you’ll need to pay taxes on any interest earned. What counts as interest? Many financial institutions offer accounts and/or services which will pay interest that can be taxed, including (but not limited to): Bank and building society accounts Savings and credit union accounts Unit trusts, investment trust, and open-ended investment companies Peer-to-peer lending Trust funds Payment Protection Insurance (PPI) Government or company bonds Life annuity payments Some life insurance contracts Some accounts are eligible for additional tax-relief, including Individual Savings Accounts (ISAs) and National Savings & Investments (NS&I) accounts. Interest earned from these types of accounts do not count as taxable interest. Do I need to file a self-assessment tax return?  If your savings interest exceeds the tax-free allowance threshold, you must pay taxes at the normal income tax rates. If you’re in full-time employment or are receiving a pension, HM Revenue & Customs (HMRC) will adjust your tax code to collect tax automatically. When determining your tax code, HMRC estimates how much interest you’ll earn in the current tax year based on the interest you earned in the previous year. If you still need to fill out an additional self-assessment tax return, report any savings income on that form. If you’re self-employed, you’ll need to file a self-assessment to report your savings and investment income. If you’re not working, not receiving a pension, or haven’t completed a self-assessment, your bank or building society will inform HMRC how much interest you received at the end of the tax year. HMRC will then tell you whether you need to pay tax and how to pay it. Please note that you cannot avoid declaring the interest you earn. Your bank or building society works closely with HMRC and will actively report your earned interest to them. If your savings interest is below your tax-free allowance, HMRC will refund any tax that you’ve overpaid. However, you must apply for the refund within four years after the end of the relevant tax year. If you’ve filled out a self-assessment tax return, you can claim it through that. If not, you can fill out form R40 and send it to HMRC. A reminder from TB Accountants Please note that income from savings within the tax-free allowance range still counts towards your overall income. If you’re close to the threshold, this income might push you into a higher tax bracket, requiring you to pay more taxes. So, if you’re a basic rate taxpayer, and the interest earned from savings is enough to push you into the higher rate threshold, you’ll only be able to enjoy a £500 personal savings allowance, and the remainder will be taxed at the higher rate of 40%. This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

Recently, one of the largest property websites in the UK, Rightmove, analysed 360 administrative regions of the UK and summarised a very detailed list of the hottest rental locations in the UK in 2023. The data shows that the rental market in the UK was quite lively in 2023, with the average number of inquiries per property increasing from 6 times in 2019 to 20 times in 2023. Due to a significant increase in demand, the average monthly rent in five administrative regions of the UK has risen by 31% to 60% since 2019. Rightmove also showed that Wrexham in Wales is the most popular rental area! It is said that landlords in Wrexham receive an average of 56 rental inquiries per day, eight times more than other areas. Let’s go! Let’s take a look at the rankings together! See if your property is listed there. Top rental markets in 2023  Here are the average rents (pcm), plus the percentage difference since 2019, ranked by order of popularity (rental enquiries): Wrexham: £960 pcm (+35%) Redbridge: £2051 pcm (+31%) Tameside: £1060 pcm (+60%) Stockport: £1389 pcm (+47%) Glasgow: £1038 pcm (+44%) Other popular markets include Thurrock (£1550), Salford (£1205), Blackpool (£795), Gravesham (£1570) and Waltham Forest (£2097). Rental market trends in 2024 Recently, economists have predicted that with the inflation rate approaching the official target of 2% and stagnant economic growth, the Bank of England is preparing to cut interest rates at least twice in 2024. So, what impact will this have on the rental market in 2024? Is it still worth investing? Data from Rightmove suggests that there are signs indicating an improvement in the supply-demand balance next year. Currently, the number of rental properties available is 11% higher than the same period last year, while the number of tenants looking for housing and making inquiries to property agents is 12% lower than in 2022. Although the supply-demand gap is improving, tenant demand is still 42% higher than at this time in 2019, while the number of rental properties available has decreased by 28%. This indicates that it will still take some time to achieve a supply-demand balance and reach the relatively normal market levels of 2019. In other words, considering the current situation of bank interest rates and the rental market, investors who wish to enter the rental market this year still have a high likelihood of achieving substantial returns. TB Accountant’s tax-saving strategies for landlord s Seeing these relatively positive pieces of information, are you eager to take a chance in 2024 and become a landlord? You will also need to understand how to save on taxes – after all, taxes can be a significant expense.  We’ll share some tax-saving tips which could help you maximise your profits for the 2024/25 tax year. Establishing a limited company As a landlord, setting up a limited company is a good way to reduce taxes. You can purchase properties through the company – this allows you to offset costs with profits, and you can also hire yourself or others to manage properties in your investment portfolio. Although this particular tax-saving strategy may not suit everyone, if it works for you, the tax-saving effect can be quite significant. If you’re interested, please contact your accountant to see if this tax-saving strategy is suitable for you. Utilise all available tax bands As a landlord, another way to potentially reduce tax expenses is to transfer some assets to your spouse. Transferring assets between spouses generally does not incur capital gains tax, so you can effectively utilise your spouse’s lower tax rate. If your spouse’s tax rate is lower than yours, you may also end up paying less rental income tax. If the relevant property does not have a mortgage and you do not receive any financial gain from the transfer, you do not need to pay any stamp duty. Make the most of your expenses Many landlords can reduce their tax expenses simply by paying more attention to their expenditures, so our advice is to make sure to declare all expenses. From now on, keep every receipt and consult your tax advisor or accountant to clarify which expenses are deductible and which are not. For example, expenses for maintaining a home office and letting agent fees can both be deducted from your profits, so why not apply for them? Consider short-term letting If you’re currently experiencing a vacancy period with tenants, you can reduce landlord taxes by offering short-term rentals. During this period, expenses such as council tax and utility bills can be declared as expenses. Selling smart Landlords often incur losses when selling rental properties because they fail to fully utilise existing tax relief policies. Landlords with multiple properties are especially susceptible to this, as if they decide to sell one of their properties, they can actually enjoy a 0% capital gains tax exemption each year. Currently, the exemption threshold is £11,300, which is a great way to save. Of course, as a landlord, the best way to save on taxes is to hire an excellent accountant and a reliable tax professional who can assist you at every step. This article is intended as general guidance only, and does not replace any legal or professional advice.  For enquiries, please contact  TBA Group  via  email  or  WhatsApp .

As we’ve mentioned in one of our previous articles, how much State Pension you’ll receive upon retirement depends on the amount of National Insurance (NI) contributions you’ve made.  We also talked about NI contributions can be purchased and applied retroactively to previous years. Did you know that you can also accumulate NI credits to help build up the number of qualifying years so that you can receive the full State Pension? What are National Insurance Credits? National Insurance Credits are a way to maintain your national insurance record when you are unable to pay national insurance contributions. They can help you build up “qualifying years for state pension,” which will count towards your entitlement to basic state pension and other benefits. How are National Insurance Credits obtained?       You’ll firstly need to check whether you are eligible to receive credits.  Some types of credits can be automatically applied to your record, whilst others will require an application to be made to HMRC or the relevant department. If eligible, you will receive the following types of credits: Class 1: towards the State Pension and other benefits (e.g. New Style Jobseeker’s Allowance) Class 3: towards the State Pension only Note that if you have paid NI contributions for one year (a ‘qualifying year’ for the State Pension), you can transfer the credits earned while claiming child benefit to a spouse or partner who lives with you. Who is eligible for National Insurance credits? NI credits are generally designed for circumstances where you are unable to work and pay NI contribution.  Eligibility criteria include: Currently claiming or previously claimed certain benefits due to ill health or unemployment Currently or were previously on maternity, paternity, or adoption leave Currently or were previously caring for children under 12 Currently or previously participated in approved training courses Married to or in a civil partnership with a member of the armed forces and deployed overseas with your partner Currently or previously served as a juror Served a sentence for a conviction that was later overturned These criteria are applied differently and can result in different types of NI credits being issued.  As we mentioned above, some are obtained automatically, whilst others require an application to made. For up-to-date information, you may visit the Government’s information page . Am I eligible? We’ll touch upon the most common situations where you may be eligible for NI credits. 1. Child Benefit Recipients If you are a parent aged 16 or above, currently receiving Child Benefit and caring for children under 12, you will automatically receive Class 3 credits. Additionally, grandparents and other family members aged 16 or above who are caring for children under 12 but have not reached State Pension age can also receive Class 3 credits. However, if you fall into this category, you need to fill out the CF411A form to apply for these credits. 2. Carers If you receive the Carer’s Allowance, your NI record will automatically be allocated Class 1 credits. Those receiving Income Support will also automatically receive Class 3 credits. If you do not receive Income Support but provide at least 20 hours or more of care per week for a sick or disabled person, you may be eligible for Class 3 credits but will need to make an application to HMRC. 3. Unemployed Individuals Individuals receiving Universal Credit will automatically qualify for Class 3 National Insurance Credits. If you are actively seeking employment, you may also qualify for Class 1 National Insurance Credits. If you are already receiving Jobseeker’s Allowance, these credits will be added automatically to your record. If you are unemployed and seeking work but not receiving Jobseeker’s Allowance, you need to apply for Class 1 credits through your local job centre. Participation in government-approved training courses of less than one year can also earn you Class 1 credits. 4. Illness and Disability If you are unable to work due to illness or disability and are applying for benefits such as the Employment and Support Allowance or the Unemployability Supplement, you will automatically receive NI credits. If you are eligible for these benefits but do not receive them, you can apply for Class 1 credits through your local job centre. In some cases, you may be receiving statutory sick pay, but your income is not enough to meet the qualifying years for NI. In such cases, you may be eligible for Class 1 credits. For this, you will need to contact HMRC. 5. Armed Forces Spouses/Partners Due to changes in State Pension rules requiring 35 years of contributions for the full pension, HMRC and the DWP have introduced NI credits for Armed Forces spouses. These credits can help maximise your State Pension. The basic principle of this system is that when you accompany your spouse or civil partner on overseas military service, you can apply for credits.  This process is not automatic – you need to apply for them and can only apply for periods overseas on or after the 6th April 1975. 6. Jury Service If you have served as a juror and are not self-employed, you may be eligible to apply for Class 1 credits. However, you need to submit an application to HMRC. Supplementing your State Pension Besides from these situations, if your retirement income is relatively low, you may also be able to obtain additional retirement income through other means, such as Pension Credit. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

In the UK around 45 million people regularly play the lottery. Although the vast majority of them have never won anything, there are still some lucky ones who have won big prizes. One lottery player won a £195 million lottery jackpot, breaking the record for the highest lottery prize ever won. What can £195 million buy? This amount of money could buy 11 Boeing 747 airplanes, 23 Pisces-VI submarines, or even multiple luxury townhouses near Southampton Football Club or London’s Mayfair! 1. How have winners spent their money? Colin and Chris Weir from Largs, North Ayrshire, broke records in July 2011 by becoming the largest lottery winners in the UK at that time. Colin invested £2.5 million in his beloved Partick Thistle Football Club, naming one of the stands at the stadium after himself. He later acquired a 55% stake in the club, which was eventually transferred to the local community after his passing. The couple also established the Weir Charitable Trust in 2013 and donated £1 million for the Scottish independence referendum in 2014. Adrian and Gillian Bayford won €190 million in the EuroMillions lottery draw in August 2012, amounting to just over £148 million. According to the Mirror, the couple purchased a Grade-II listed property in Cambridgeshire, complete with a luxury cinema and snooker room, but it was sold a few years after their divorce. Former social worker and teacher Frances and her husband established two charitable foundations after winning nearly £115 million on New Year’s Day in 2019. It has been reported that she has donated £60 million to charitable causes as well as to friends and family. 2. Do taxes need to be paid on lottery winnings? The answer is quite simple, no. In the UK, lottery winnings are not considered taxable income.  However, income tax must be paid. Once you deposit the money into the bank, it will inevitably start accruing interest. Since this interest is not part of the original windfall, income tax is paid on the interest – this is personal income tax. Although questions have been raised over whether the interest earned is simply part of the original earnings, HMRC has never provided a definitive answer. Additionally, inheritance tax must also be paid. In the UK, if the value of an estate exceeds £325,000, inheritance tax is due. So, if the winnings are passed down as inheritance, then the inheritance tax rate of 40% is applicable. What if the winner gifts the money to someone before their death? It is possible to gift up to £3,000 per year to others tax-free, and this amount is not added to the estate. Moreover, if the previous year’s tax-free allowance hasn’t been used, it can be carried forward for one year, allowing a total tax-free allowance of £6,000 for the next year. Furthermore, HMRC stipulates that when money or assets are gifted, they remain part of the estate for seven years after the gift is made. This means if the winner gifts the money to a relative or friend and passes away within seven years, the money will still be considered part of the estate, and the recipient will be liable to pay tax on the gifted amount. For example, let’s say A wins a lottery and wishes to gift £50,000 to his son. Since A has a tax-free allowance of £6,000 (not gifted to anyone in the previous year), £44,000 remains part of A’s estate in the year A gifts the money to his son. If A unfortunately passes away two years later, his son would need to pay inheritance tax on the £44,000.  However, if A passes away after ten years, the gift has surpassed the seven-year period and is no longer part of A’s estate, so his son wouldn’t need to pay any tax on it. 3. When is inheritance tax due? HMRC stipulates that the executors of an estate must pay within six months after the individual’s death. If payment is not made within this timeframe, HMRC will begin to charge interest. Additionally, executors can opt to pay tax on certain assets, such as property, in instalments over ten years. However, any unpaid tax will still accrue interest. If any assets are sold before all personal income tax is paid, executors must ensure that all instalments and interest are paid at that time. If your estate incurs personal income tax, it’s advisable for the executors to make partial payments within the first six months after death, even if they haven’t completed the valuation of the estate. This will help reduce the interest the estate may generate. If the executors or administrators pay tax from their own accounts, they can reclaim it from the estate. If personal income tax is overpaid during the probate process, HMRC will refund the estate. Remember, if appointed as an executor or administrator of an estate, it’s necessary to complete and submit an estate account within one year after the deceased’s death to avoid penalties. 4. Planning ahead Perhaps you haven’t won the lottery, but you may have other assets you would like to pass on.  What is the most tax-efficient way to do this? Giving Gifts While Alive Gifts during one’s lifetime can reduce some expenses: Annual exemption – Each person can gift up to £3,000 worth of gifts in each tax year without it being added to your estate’s value. If you haven’t used last year’s exemption, it carries over to this year, making your annual exemption total £6,000 Wedding or civil ceremony gifts – In addition to the annual exemption, you can leave wedding or civil ceremony gifts of up to £1,000 per person. If it’s for grandchildren or great-grandchildren, this amount increases to £2,500; if it’s for children, it’s £5,000 Small gifts exemption – Provided you haven’t used any other exemption on the same person, you can also give gifts worth up to £250 to any number of people in each tax year Taking this into consideration when drafting a will is crucial. If your estate’s value exceeds £325,000, giving money while you’re alive may be more tax-efficient. However, it’s essential that gifts are made outright, or they may not achieve the intended tax effect. For example, if you transfer property to your children but continue to live there and benefit from it, the gift may not qualify for exemption. Leaving Money to Charity in a Will Anything left to a charity is exempt from inheritance tax. If you leave an estate worth £350,000, including a £30,000 charitable donation, no inheritance tax is due. This is because your taxable estate value would be calculated as £320,000 (£350,000 minus £30,000), which is below the £325,000 inheritance tax threshold. Furthermore, you can also reduce your inheritance tax rate by leaving over 10% of your net estate to charity. Putting Pensions and Life Insurance Policies into Trusts Pensions and life insurance policies can be great ways to minimise tax bills. Trusts may be needed for both types of policies, often meaning any payouts won’t form part of your estate but will go directly to your beneficiaries, without incurring inheritance tax. Leaving Everything to Your Spouse If you’re married or in a civil partnership and your partner is domiciled in the UK, regardless of the value of your estate, they won’t have to pay inheritance tax on what you leave them. Married couples and civil partners can also pass on their unused exemptions to their partners, significantly increasing their partner’s exemption allowance. Leaving the House to Your Children In April 2017, a ‘main residence’ nil-rate band was created. If homeowners leave their homes to children, stepchildren, or grandchildren—or their spouses or civil partners—they can get an additional £175,000 of the nil-rate band allowance. If you have any questions about inheritance tax, contact TB Accountants. Our professional accountants can discuss and help you plan ahead for inheritance tax. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

The British property market has always been favoured by investors both in the UK and across the world, with many taking part in the buy-to-let market.  Due to the impact of the pandemic, the rental market experienced a period of cooling for two years. However, this situation only lasted until the 2021 fiscal year. At the beginning of that year, the UK rental market underwent a transformation and started booming again. The latest report from the Royal Institution of Chartered Surveyors (RICS) shows that there has been steady monthly growth in tenant housing demand since November last year, while the supply of properties available from landlords has been gradually declining. From early 2022, there has been an imbalance between the supply and demand in the UK’s private rental sector, leading to continuous rent increases. Data shows that by August 2022, private rental prices in England increased by 3.4%, marking the largest annual growth rate since January 2016. Additionally, Wales saw an increase of 2.5%, and Scotland saw an increase of 3.6%. Although rental prices in London have been recovering somewhat slowly, there has been a noticeable uptick. By August 2022, private rental prices in London had increased by 2.5%, marking the strongest annual growth in London since October 2016. With an increasing number of new tenants, now may be the best time for landlords to enter the real estate market, as high rental demand can provide good investment returns. If you are a first-time landlord entering the buy-to-let market, there are some strict tax rules you may need to be aware of. For example, did you know that the rent you receive each month is actually considered as income, and HMRC will require you to pay income tax?  The higher your rental income, the higher your overall income, and the more tax you’ll have to pay. 1. What taxes need to be paid by landlords? The only tax that private landlords need to pay on rental income is income tax. Within the industry, some refer to it as ‘landlord income tax’, ‘buy-to-let income tax’, ‘property income tax’, amongst many other terms. It’s worth noting that you only need to pay tax on the net rent – that is, your actual profit. The calculation of profit involves adding together all rental income received from different properties and then subtracting any allowances, reliefs, or allowable expenses, resulting in the final profit figure. Different rules apply if you are: Renting out a room in your home Renting out furnished holiday lettings Renting out foreign properties Renting out UK properties whilst residing abroad 2. What counts as rental income? Rental income is primary the rent received for leasing the property, but also includes any other payments collected for services provided by the landlord.  This can include: The cleaning of common areas Utility bills – including hot water, heating, broadband, and water charges Property maintenance If you collect a non-refundable deposit on the property, this also counts as rental income. Any money retained from the refundable deposit at the end of the tenancy is also counted as rental income. For example: A landlord charges £750 per month in rent, including bills, which must be reported as income in its entirety. If, at the end of the lease, the tenant agrees to forfeit a £500 deposit to cover property maintenance costs, this is counted as rental income. So, although the rent for the year is £9,000, the landlord must declare income of £9,500. However, the landlord can still deduct the £500 maintenance fee they paid as an expense. 3. What is the tax rate for rental income? The income tax rates and thresholds for your rental income are the same as those for your personal income tax rates and thresholds, which at the time of writing are 0%, 20%, 40%, or 45%. However, adding your net rental income to any other income you receive (e.g. from employment) may push you over your usual tax threshold into a new, higher bracket. So, how do you calculate the tax rate after calculating your rental profit? Firstly, if you’re not a full-time landlord and you have a salary, you’ll need to calculate your annual salary to determine your personal income tax bracket. Secondly, subtract your property allowances or allowable expenses from your total rental income to show your net rental income (i.e. profit). Thirdly, add your salary, net rental income, and any other remaining net income together to determine your income tax bracket. Here’s an example: Your salary is £40,000 You also receive £20,000 in rental income You deduct £5,000 in expenses from the rental income, leaving you with a net rental income of £15,000 These are your only sources of income. You add your salary and net rental income together to find your income tax bracket: £40,000 + £15,000 = £55,000 So, you fall into the higher tax bracket. You’ll pay: 0% on the first £12,570 = £0 20% on the portion between £12,570 and £50,270 = £7,540 40% on the remaining £4,730 over £50,270 = £1,892 Total income tax, including tax on rental income = £9,432 4. What are the deductible expenses? Deductible expenses refer to costs that, as mentioned above, you have incurred solely and exclusively for the purpose of renting out your property.  These can be deducted from your rental income when calculating your taxable profit. General maintenance and repairs of the property, but not including renovations Water rates, council tax, gas, and electricity Insurance, such as landlord’s building, property, and public liability insurance Service charges, including wages for gardeners and cleaners Letting agent and management fees Legal fees for leases of a year or less or for renewals of up to 50 years Accountant’s fees Rent (if you’re a sub-landlord), ground rent, and service charges Direct costs such as telephone, stationery, and advertising costs for new tenants Vehicle running costs (only for the portion used for the rental business), including mileage deductions for business driving expenses. Expenses that are not deductible include: Your entire mortgage payments – only the interest portion of your mortgage payments can be offset against income Private telephone bills – you can only claim for phone bills related to your property rental business Clothing – for example, if you buy a suit to attend meetings related to your property rental business, you cannot claim this expense. HMRC may consider that part of wearing the suit is for your rental business, while another part is for warmth Personal expenses – you cannot claim for any expenses incurred that are not entirely for your property rental business 5. How should landlords pay the tax owed? How the tax is paid depends on the total amount of rental income received. In the UK, how you pay tax depends on the amount of rental income you receive. If your annual rental income is less than £1,000, you don’t need to report it to HMRC. If your annual rental income is between £1,000 and £2,500, you need to contact HMRC for further instructions. If your income is between £2,500 and £9,999 after deducting expenses, or if it exceeds £10,000 before deducting allowable expenses, then you need to register with HMRC and complete a tax return including your rental income as part of your annual self-assessment. It’s important to note that landlords pay the tax on rental income by filling out a self-assessment tax return, which needs to be done each tax year. HMRC uses these figures to determine how much tax you owe. Therefore, when completing your tax return for buy-to-let properties, you must keep receipts for any work done on your property to claim any expenses. Landlords have two options for completing self-assessment: doing it themselves, or hiring an accountant to represent them. Calculating rental income and allowable expenses can be complex, especially for landlords with multiple rental properties, which can easily become confusing. Additionally, HMRC offers various allowances and policies, and different properties may have different saving methods. Therefore, we strongly recommend that landlords use an accountant to help plan their taxes to provide peace of mind. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

I’m sure many of us have dreamed of living in fancy mansion, or next-door to a celebrity.  Have you ever taken a look at how much it might cost? Let’s take a look together. 1. Location, location, location There is one street in Wales prized for its prime location and comfortable living prices, meaning that despite not being in the financial centre of the UK, sale prices are still often over £1 million. However, once we zoom out and look across the UK, we still find that the ten most expensive streets are all concentrated in London. According to Zoopla, properties on these 10 streets have purchase prices starting in the seven figures – millions of pounds – for a total value of £45.23 billion. 2. Living next door to David Beckham? In their ranking, the most noteworthy and also the most expensive street is Kensington Palace Gardens, also known as the ‘Billionaires’ Row’. Not only does it boast residents like Prince William and David Beckham, but it has also held the title of the most expensive residential street in the UK for 12 consecutive years, with the average house price reaching £35 million! According to Zoopla’s data, the average price of a mansion in Kensington Palace Gardens is £30 million, compared to the average UK house price in the UK of just £250,000. This means that properties here cost 140 times as much! But why live here? Kensington Palace Gardens is located in the affluent area of Kensington and Chelsea, adjacent to Hyde Park, and boasts beautiful natural surroundings. Kensington Palace, where the Duke and Duchess of Cambridge reside is also located on this street. Many embassies or ambassadorial residences of countries such as France, Russia, Japan, and India are also situated here. Not only does it offer a comfortable living environment, but it also boasts a very prime social circle. To be part of the social circle, many celebrities have also purchased properties here, including football superstar David Beckham, the popstar Madonna, the renowned talent show judge Simon Cowell, British-Indian steel magnate Lakshmi Mittal, Chinese tycoon Wang Jianlin, amongst many others. Owning a property in Kensington Palace Gardens means being neighbours with some of the wealthiest and most powerful celebrities and political figures in the world. It serves as a stepping stone for breaking into high society. 3. ‘The Jewel on the Hill’  Ranked second is Courtenay Avenue, located in the Haringey area of Northwest London, home to the famous Alexandra Palace. British media once referred to Courtenay Avenue in Haringey as one of London’s top three upscale neighbourhoods, alongside Westminster and Kensington & Chelsea, earning it the nickname “The Jewel on the Hill.” The houses here exhibit diverse architectural styles, ranging from classic English-style cottages to modern villas with sleek glass constructions, surrounded by the beautiful natural scenery. 4. How about a Grade-II listed building? The third place goes to Grosvenor Crescent in Belgravia, a wealthy area in central London. This street is predominantly lined with terraced houses and features a curved crescent shape, hence its name Grosvenor Crescent.  It was developed by the Grosvenor family, British real estate magnates, during the 19th century when they built Belgravia. It’s worth mentioning that numbers 1-10 on this street were built in 1836 and are designated as Grade-II listed buildings by the British government! Living here really gives you a feeling of residing in a historical landmark, filled with rich cultural heritage.  Additionally, the Belgian Embassy, established in 1860, is also located on Grosvenor Crescent. 5. When purchasing a luxury property, what should you pay attention to? Great question! Opportunities in life are unpredictable. You never know when you might have the chance to live next door to Prince William and David Beckham, right? Luxury homes represent not only lavish living environments, but are also symbols of vastly different social circles. Property prices not only signify the value of the buildings themselves, but also encompass the hidden wealth and social connections that come with owning such properties. When purchasing a luxury home, you can choose a suitable property based on your specific needs. Of course, remember not to forget to pay the corresponding taxes and fees! If you’re unsure about anything, contact TB Accounts for more advice. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .

A restaurant owner in Knaresborough was recently fined for committing tax evasion for more than 3 years, with unpaid Value-Added-Tax (VAT) of over £51,700. The owner Razaul Karim applied for a VAT registration for his restaurant in 2013, subsequently cancelling his registration in 2015 after declaring that the annual turnover was below the registration threshold.  However, records show that in August 2019, the restaurant had a turnover of almost £130,000, well over the registration threshold of £85,000. This case brings to our attention how important it is for takeaway and restaurant businesses to be aware of how VAT is calculated, especially since HMRC has very specific rules for how different foods and drinks are taxed.  Many other business owners have been caught out for accidental tax avoidance and evasion because of this. We’ve created a guide to help you understand the basics, so that you can avoid making any costly mistakes. 1. What is Value-Added-Tax (VAT)? VAT is a basic consumption tax levied at the point of sale for most goods and services, is collected by suppliers and remitted to HMRC.  Assuming your business is based in the UK, you only need to register for VAT if your annual turnover reaches £85,000. Our guide will assume that you’ve already registered for VAT. 2. How is VAT calculated for food? Most foods will either be zero-rated or charged at the normal rate of VAT (20%). Generally, the following foods fall into the zero-rated category: Raw meat and fish Vegetables and fruits Grains, nuts and legumes Culinary herbs Other foods that fall under the standard rate include catering foods, alcoholic beverages, sweets, crisps, salty snacks, hot food, sports drinks, hot takeaways, ice cream, soft drinks and mineral water. If you are running a restaurant or catering service, you cannot simply judge based on the VAT rate of the food itself.  You need to consider three important factors: Is the food itself zero-rated, or subject to the standard rate? Is the food served on the premises, or for takeout? Is the food hot or cold? 3. Which rate of VAT do I apply to sales? It’s important to distinguish between the sale of food itself, and food sold ‘in the course of catering’. Even if the underlying food is zero-rated based on the explanation above, if it is sold ‘in the course of catering’, the standard rate will still apply. How is this determined? HMRC has provided some official guidance: Food and beverages prepared on the premises (excluding cold takeaway food) Providing cooked/ready-to-eat food/meals, regardless of whether cutlery is included Providing food and beverages as a third-party (i.e. catering service) Cooking or preparing food at the client’s premises (e.g. chef rental service) On the other hand, the following situations are usually zero-rated: Providing chilled takeaway food Grocery store sales Sale of food and beverages that require further preparation by the customer Besides from this, you also need consider whether you are selling hot food: Food that is heated and eaten hot Food that stays hot after heating Advertising/marketing the food as hot Food that is heated on request Food that is provided with packaging for heat retention Hot food is always standard-rated, whilst cold food can be zero-rated. 4. What are the different rules for eat-in and takeaway? Additionally, you’ll also need to consider where the food is consumed. Regardless of the underlying VAT rate, if your customer is consuming food or beverages on the premises, you’ll still need to charge the standard rate of VAT. ‘Premises’ is defined as an area occupied by a food retailer or set aside specifically for the consumption of purchased food or beverages, including any spaces shared with other food retailers. If you’re operating a takeaway, the underlying VAT rate and hot/food distinction outlined above will also still apply.  The standard rate of VAT will apply if: The food itself falls under the standard rate The food is classified as hot food The food is consumed on the premises (if you are selling takeout but offer an optional seating area) Takeout food is zero-rated if: The food itself is zero-rated The food is classified as cold food The food is consumed off-premises 5. Some advice from TB Accountants So, let’s look at an example. If you run a coffee shop and you sell raw coffee beans in a container for customers to take with them, the coffee beans are zero-rated.  If you then use those coffee beans to produce hot coffee to sell to customers, the standard rate of 20% will apply. This is the case whether they are taking the coffee away or sitting down at your premises. Still confused? Many business owners are.  TB Accountants is here to provide you with expert support.  Get in touch with us and we’ll see how we can help you. This article is intended as general guidance only, and does not replace legal or professional advice. If you have any questions, please contact TBA Group via email or WhatsApp .