Category Archive: October 2016

  1. Tax Tips when hosting paying guests

    Leave a Comment

    It is becoming increasingly popular for people to rent out rooms or their homes as holiday accommodation. More and more holiday makers are looking for accommodation via websites such as Airbnb. This growing trend means holiday makers are finding cost effective and alternative accommodation and landlords are making a bit of extra money. However additional income means there are potential tax implications which landlords should be mindful of to ensure they avoid any unwanted and unexpected bills from HM Revenue & Customs.

    Income received from lettings such as those via Airbnb is taxable income, however there are ways to mitigate the tax payable.

    Tax reliefs available
    Should an individual let a room in their main residence there are two ways to calculate the taxable profits. An individual can calculate the gross rents received and deduct from this expenses linked directly to the lettings. Alternatively, the landlord letting a room in their own home can claim relief under the “rent a room scheme”. Here, as long as certain criteria are met, the landlord can earn gross rents up to £7,500 per year tax free and all expenses are disregarded. The rent a room relief should be sufficient to remove most Airbnb landlords letting rooms in their own homes from any tax charge on the income received. This threshold is halved if the income is shared with a partner or other individual.

    It is worth stressing that the rent a room scheme is only available to “live in landlords” letting out rooms in their own homes. Where an individual lets a whole property, or rooms in a property, which is not their main residence, the default position would be to deduct expenses from the income received in calculating the taxable profits. However, during the 2016 Budget, a new £1,000 tax free allowance was announced for ‘micro-entrepreneurs’, coming into effect from April 2017. Should an individual earn up to £1,000 from property letting the income will not need to be declared. Should the income exceed £1,000 the landlord can choose whether to claim actual expenses incurred, or to deduct the flat £1,000 from the income.

    VAT Implications
    Landlords who are VAT registered due to other business interests need to consider if their VAT registration will impact on any holiday lettings income. If, for example, a couple own and run an unincorporated business as a partnership and the partnership is VAT registered this will mean any other business income will be covered by this VAT registration. If they also jointly own their home and rent out spare bedrooms via Airbnb they will need to charge VAT at the standard rate. This could mean their prices are less competitive than others in the area.

    Capital Gains Tax
    Finally, the sale of the family home is normally exempt from capital gains tax as it attracts Principal Private Residence relief. This relief will be preserved in full where they have met the conditions for rent-a-room relief. For any period where the home was not occupied as the sole or main residence then this portion of gain will not attract the relief, however each individual currently has an annual exemption of £11,100 for capital gains tax.

    If you are considering renting out rooms or property as holiday accommodation you should seek further advice. The specialist tax team at Wright Vigar would be delighted to discuss your circumstances and offer you personally tailored advice – simply call us on 01522 531341 or email michelle.allen@wrightvigar.co.uk.

  2. October 2016 Tax Tips & News

    Leave a Comment

    Welcome to October’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

    If you need further assistance just let us know.

    Finance Bill 2016 receives Royal Assent

    Termination payments consultation

    HMRC launch online disclosure service for agents

    Lifetime ISA guidance updated

    October Question and Answers

    Q. I have recently started a new job and, for the first time in my career, I have been provided with a company car. I have to pay for fuel for private use but my employer says I can claim mileage for business journeys. Will I have to pay tax on fuel payments?

    Q. I am a director of a limited company, which is registered for VAT. I have recently formed a limited partnership, with my limited company being the only general partner and another business being a limited partner. HMRC have written to me advising that I am unable to register the limited partnership for VAT as my limited company is already VAT-registered. Is this correct?

    Q. Having been an employee of a company for many years, I was appointed to the board of directors from 1 March 2016. I understand that Class 1 National Insurance Contributions (NICs) are calculated differently for directors. Can you please explain how it works and let me know what will happen for the rest of the current tax year?

    October Key Tax Dates

  3. Wright Vigar acknowledged as Cloud Software experts

    Leave a Comment

    We are proud to announce that Wright Vigar have achieved Platinum Status as a Xero Certified Adviser.

    What this means is that Wright Vigar as a firm are acknowledged as the Xero practice experts in Lincolnshire and Nottinghamshire and we are the only accountancy practice to achieve this status in the area.

    This amazing achievement is due to a company-wide initiative to boost the uptake of cloud software solutions – and was achieved by identifying a number of our clients who are ideally suited to this easy way of managing books and records – thus streamlining the many processes involved with completing quarterly tax returns and end of year accounts for HMRC.

    Xero have recognised this move as important to their growth in the UK, and will be working closely with the Cloud Software team at Wright Vigar to ensure our clients receive a seamless transition to this new easier way of working.

    Using a cloud-based bookkeeping solution not only offers our clients a stress-free way of keeping on top of the paperwork, it also allows our clients the flexibility of being able to access their up-to-date finances anytime, anywhere – empowering the business owner with a greater knowledge and control when making business decisions.

    As we head towards making tax digital, the team at Wright Vigar are always on hand to support and advise our clients on the best options for them to ensure they are able to run their business more effectively and efficiently.

    More information on making tax digital can be found by following this link:-

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/484668/making-tax-digital.pdf

    And if you would like any advice on these changes, or your own personal situation, please contact a member of the team at your local Wright Vigar office – we would be delighted to work with you.