Tax returns, dates we need to be aware of?

We rented out our property in Sept 2020. From our understanding we need to complete online self assessment tax returns by 31 Jan 2022? So we will most likely do these self assessment returns in May 2021 as we will then have all income and expenses for 2020-2021 tax year. We have asked for and got our UTRs. Also we both work for companies.

Do we have our dates correct? And when would they request payment? Or do they simply send a letter? We are also confused by the payment on account thing, would this be 31 Jan 2022 a halve payment of the tax that we filed in the 2020-2021 returns?

Thanks

You are not the only one that gets confused. thats why I use an accountant

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I think your dates are correct. I also think that the payment on account is only made when demanded and my understanding is that when you complete the self assessment, the tax calculation will include an amount to be paid on account for the year 2021-22 by 31 Jan 22.

Thanks Colin3, problem is if your accountant turns out to be incompetent HMRC don’t care and you pay the fine.

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Thanks David122 for your helpful reply.

I have had the same accountant for 20 years and they are excellant .never had a problem and allways looked after me

You are right that if your first rent was Sept 20, your first tax return will be for 2020-21 (6 April 2020 to 5 April 2021) and will be due by 31 Jan 2022.

Whenever you file your return, the tax will be due on 31 Jan 2022.

If you owe more than £1,000 in tax, you then have to start making payments on account. So, say you owe £1,200 for 2020-21, your payment DUE* on 31/1/22 will be £1,200 for 20-21 plus a payment on account of £600 (50% of the tax due) for 21-22. You then pay another £600 in July 2022 and then any balance in Jan 23 together with the next payment on account of 50% of the 21-22 tax.

If you owe less than £3,000, have enough PAYE income and file by 30 December, you can opt to have the tax collected through PAYE if you qualify (https://www.gov.uk/pay-self-assessment-tax-bill/through-your-tax-code). Most of my clients don’t do this because it gets confusing!

They may amend your tax code anyway to try and collect an estimate of the current years tax through PAYE too but you can call them and ask them not to (again, I would have it taken out of your tax code because it gets confusing if you let them leave it in!).

*Edited to keep Mr Picky Pedantic happy!

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I wouldn’t suggest making the payment on 31 Jan Cath2. The funds have to be cleared by the end of that date so best to do it a couple of working days before at the latest.

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I didn’t say to pay it on 31st, I said it was due by 31st! If you do pay a few days late, they will just add a bit of interest though (assuming the return was filed on time), so it is not critical.

The really key date for payment, though, is 30 days after 31 January (so the exact date depends on whether it is a leap year) - if you more than 30 days late, they add on a 5% surcharge overnight (unless you have arranged a payment plan with them before that).

So, say you owe £1,200 for 2020-21, your payment on 31/1/22 will be £1,200 for 20-21…”

Really, you are going to be that picky! Get a life. May be I’ll just stop helping people if others are going to pick holes!!

I would say it’s a lot less stressful to use an accountant, and their fee is tax deductible.
You must have some contacts that can recommend a good one?
I am sure there are lots of members here that could help.
I would recommend mine as they are so helpful and user friendly.

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For goodness sake, it wasn’t a criticism. I was just trying to make you aware that if you leave it till the last day you are likely to exceed the deadline. Detail is important!

Most people have correctly given their time and effort answering this, in the main this is a helpful forum and we are a community to share information, opinions and advice.

A few things you may not have considered and a reminder of others in summary.

Whichever day you complete your tax, payment is then due and as previously said you need to allow time for bank transfers to ensure HMIT receive their payment on time, if deadlines are involved. Just because it leaves you on a certain day does not ensure delivery. Banks often hold bank certain payments for security checks. In reality most arrive fine but you need to be aware of this.

You pay the tax due PLUS payment on account for the following year, the second payment 6 months later using HMIT dates

If you complete in May, the above payments immediately apply. Cashflow wise if you pay say the 25th January 2022 then there will be plenty of time for payment of any due taxes through the banking system to arrive, plus you have an increase in cashflow from May 2021 to the following January 2022. Remembering in following years you would have made two payments contribution to any future due tax.

Also remember rental is classed as a business and separate from any personal allowances.

Rent in joint names to reduce any 40% tax liability or future changes tax bands that may affect you. Hence the net profit is divided by the number of owners. If you have a lower or nil tax payer, you may wish to consider re-apportioning ownership to reduce rental taxation but remember on sale you will also have pro-rata capital allowances at the time of sale.

Expenses you can only claim those wholly for the rental property, or travel in doing so. This includes inspections. Tax allowances change each year so I’m not going into this any future.

You should also consider and plan for any future sale of your property keeping all improvement expenses separately, not repairs and renewals. I.E An improvement would be to increase the number of kitchen units, add an extension, conservatory. Add / extend anything that was not there originally. All these go towards and Capital Gains allowances. As tax laws and the percentage liability may change you must keep these separate.

You say you let out your property, some further advice, if it is your own property and not a second property (more than one), then you need to remember that if a tenant moves out and you then decide to use your own property again and move back in, you CANNOT claim for the expenses for repairs and renewals post the tenant leaving. Only expenses occurred during the tenancy may be claimed. So do any necessary whilst the tenancy is in force. Alternatively, do the necessary and let for another period of months.

If you sell your own property which was also rented, currently you need a pre let property value, sold value post letting or moving back in and use with agreed HMIT ratios for your own and let occupancy periods. The Capital Gains expenses above then kick in, legal fees, any allowances.

If you haven’t and your property is a first time let, inspect every three months, when happy twice a year then beyond will depend on any tenancy. You can claim mileage from the HMIT mileage chart. Do keep a log of all visits and why, i.e inspections, contractor visit, buying materials, inventory inspections.

Hopefully you have your answer from everyone and a bit on top to help manage your tenancy effectively.

Sorry, don’t want to be picky when you’re (like me) being helpful, but this bit didn’t quite make sense to me. The gain is calculated on the difference between the actual sale price and sale/purchase costs (inc legals, stamp duty, agents fees) and then time apportioned between the time it was your personal private residence (tax free) and the time it wasn’t (taxed at 18/28%) subject to allowances. You also get the last 9 months tax free if you’ve lived in it. Tax when you sell your home: If you let out your home - GOV.UK

Thanks for all the helpful advice/info.

Submitting the tax return in January - an accountant said to us it wasn’t a good idea because if there is an issue with the return then they’ll be a fine. Whereas if submitted early like Aug/Sept then HMRC have had plenty of time to query anything.

Currently one of us is earning 48k the other 10k. We will each receive 6k in rent (profit after expenses). So we looked at changing the 50/50 ownership to 99/1. But seemed far simpler for now that the 48k earner put 5k more into their company pension to end up on 49k taxable income.

No current plan to sell as we want to keep it for our children who may want to live there in the future.

In total rent tax for us would be 20% of 12k, which is 2.4k to pay on tax return day, but also 1.2k would be need to be paid on account?

I think the higher earner will be in the 40% tax bracket for some of the earnings

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Cathy, nothing to do with being picky, it was a summary statement as I said, for detail visit the Inland Revenue site as this will change every year

https://www.income-tax.co.uk/after-tax/54000/

What bit do you not understand! Stop making stupid comments. He is asking a question not if you have a good accountant or not! stop selling!!!