Read our latest article for Your Move Magazine – ’10 tax mistakes that landlords make!’

With the 31 January filing deadline fast approaching, many landlords are labouring over their computers filling in their  2012 Self-Assessment Tax Returns. With this in mind, read our list of 10 common tax mistakes below to ensure you’re not giving the taxman more (or less!) than you should be…

 1 Forgetting to include other income – We see many examples of people who leave off their salaries from their tax return, believing that as this income is taxed at source, it is not relevant. The same can go for bank interest. It all needs to be included.

 2 Not claiming the ‘Wear and Tear’ allowance – When it comes to furnished property you can either claim the renewals basis, ie you claim the cost of renewing any items of furniture etc, or the ‘Wear and Tear allowance’. In the great majority of cases the ‘Wear and Tear allowance’ makes more sense, giving a straight 10% deduction from net rents. Watch out though, you can’t chop and change!

 3 Offsetting property losses against other income, to generate a refund – You can never (other than for Capital Allowances) set rental losses against your other income, they can only be carried forward to the day that your rental business is in profit.

 4 Not recording rents on an ‘Accruals Basis’ – This is accountants jargon, but for most landlords it means that rents should be recorded on a due basis and not on a paid basis. So if the rent due in the year was 12 x £500, then the income figure for your tax return should be £6000 even if your tenant may have actually paid you slightly early or late. If a debt goes bad, then you get relief for that.

 5 Putting income from jointly owned property on only one person’s tax return – Many people believe that as long as someone is reporting the rent then that is good enough.  Rent and expenses from jointly owned properties need to be split in the proportion of the ownership and reported on the tax returns of all owners.

 6 Getting the mortgage deduction wrong -Many people think that the entirely of their mortgage repayments are an allowable expense, however if you have a capital repayment mortgage or if you have remortgaged to more than you paid for the property (including Capital expenditure) then the amount you can claim will be restricted.

 7 Not claiming travelling expenses and out of pocket expenses – Landlords can claim travel costs when they relate wholly to the letting business. Other common mistakes are omitting expenses like council tax and utilities for void periods.

 8 Making a claim for your own time in managing the property business – A landlord cannot claim the cost of his or her own time (unless the property is owned and let by a company). However landlords could consider paying wages to another family member who helps with the property business.

 9 Not claiming capital allowances – Landlords who have several properties and carry out their own repairs, can claim a (usually  100% ) deduction for equipment purchased. This can apply to vans, office equipment, gardening tools etc.

 10 Assuming that taking your figures to an HMRC contact centre means they have been ‘agreed’ –Discussing your tax return with one of HMRC’s staff at call centres or contact centres offers no protection against an enquiry, and is not guaranteed to pick up even the most basic errors. If in doubt – contact us!