Accountant needed for flat rental?

I'm renting out a small flat (gross income will be about £10k pa), and had planned on doing the tax by self-assessment, which I've used before no problem for freelance work, but another landlord friend told me she tried doing this originally, made some c*ck-up or other and nearly ended up with the bailiffs coming round, so recommended getting an accountant. I could do without the extra expense - is it really worth it? Also, any tips on looking for an accountant, and how much I should expect to pay?

Thanks

Reply to
TC
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An accountant would make sure that you claim everything you can against tax as well as complete the tax return correctly.

I would say about £300 plus VAT if you keep a spreadsheet of income and expenses.

Peter

Reply to
PeterSaxton

No, it's not necessary. Just make sure you read and understand the relevant HMRC guidance notes, and it's a doddle. It would be as well to ascertain from your friend *what* c*ck-up she made, and to make sure you avoid it. At a guess, she may have:

- expensed her entire mortgage payments, instead of just the interest,

- expensed the cost of buying initial furniture

- expensed the cost of furniture repairs/replacements *and also* claiming wear&tear allowance

Reply to
Ronald Raygun

Still seems strange to get as far as the bailiffs.

HMRC send out multiple demands for extra money before it gets that far.

tim

Reply to
tim.....

Whenever listening to people you need to work out how competent they are and how good you are at judging peoples competence.

To get as far as bailiff she must have -

1) made basic errors in the tax return 2) refused to pay the correct tax demanded multiple times 3) been taken to court and had a county court judgement (CCJ) awarded against her 4) refused to pay the CCJ

ie she was incompetent.

You must pay tax if it's over your tax free allowance, at your usual rate. Roughly the IR definition of taxable income = Rent - professional fees (eg agents) - mortgage interest - insurance - repairs.

Tax info here -

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- Land & Property Pages - SA105
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- Notes on Land & Property - SA105

and the bible for reference -

PIMCONT - Property Income Manual (large! - better to ask your local tax office to send you a copy) -

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In a spreadsheet I have debit & credit columns for each box on the tax return -

5.20 - Rent 5.24 - Utilities, Insurance 5.25 - Maintenance 5.26 - Finance 5.27 - Professional 5.28 - Services 5.29 - Other Expenses

Read the notes to SA105, then you'll have a good understanding of what's required.

This and The Motley Fool - Property Investing - Practical board -

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- are the the best places to ask in the UK. hth

Daytona

Reply to
Daytona

No. All accountants do is ask you the same questions the IR ask you, probably in a slightly different way. Just make sure you keep good records/receipts etc.

It is a bit like paying for somebody to clean your house. I did this once, but it took me > 24hours to 'de-clutter' so the cleaners could get in to do their job. Once the preparation is done, the cleaning work is something of a breeze. Its the same with the tax return: the pain in the ass part is assembling of the information that is required in the right format.

Reply to
whitely525

However, at least for the first year, a good accountant should make sure you arrange your affairs in order to maximize any tax deductions.

Ten years ago I started letting a house and I didn't bother with an accountant. But I've just recently discovered from reading here that I could probably have saved between 5 and 10K (over the ten years) if I'd arranged my accounts slightly differently.

(My misunderstandings were A) that a mortgage had to be secured on the property you were letting for the interest to be tax deductable and B) that the maximum borrowing allowable for tax was the amount of the mortgage when you started letting rather than the capital value at the start of the let. At least in my case the mistakes were still legal. Had I made other mistakes - e.g. thinking I could count capital repayments as expenses - I could have ended up with a 5-10K tax bill instead)

Tim.

Reply to
google

These people who say you don't need an accountant are usually the one's who make it up as they go along. In another newsgroup somebody said that if you own all the shares in a company you can take any of the money out of the company bank account "because it belongs to you indirectly"! When I pointed out that wasn't the case I was told I was wrong. It wasn't until I posted the actual legislation that they stopped arguing. They didn't even have the balls to admit they were wrong - they just disappeared.

If your income is from employment and/or investment income I think an individual can complete their own tax return but anything that involves judgement, experience and knowledge I would recommend using an accountant.

Peter

Reply to
PeterSaxton

300? I've never paid less than 500, and that was some years back.
Reply to
llort

Did you provide them with all the figures so that all they had to do was do a quick review and put your figures into the tax return?

If they had to take the paperwork and come up with the accounts themselves it may cost more.

Peter

Reply to
PeterSaxton

But this brings us back to the point that I made (was it in this thread?)

If all they are doing is putting the figures that you give them onto the return in the correct boxes, they are not saving you their fee.

tim

Reply to
tim.....

The accountant should offer guidance in what income and expenditure should be collected. The accountant can then either review a spreadsheet with the totals calculated and the expenditure analysed or they can prepare the spreadsheet themselves. The accountant can also advise on what records are needed for capital gains tax purposes.

I don't think anyone is suggesting that a tax payer needs an accountant to simply unthinkingly copy numbers provided directly onto a tax return.

Peter

Reply to
PeterSaxton

Such guidance is freely available from HMRC help sheets, so the benefit of using an accountant is helpful really only to those who are either too thick to understand the help sheets or who cannot be bothered to try. That's fair enough. It's their money and they can choose to spend it or to save it.

No, but one might suggest that with such simple bread-and-butter stuff the accountant doesn't actually need to expend a great deal of thought in bringing about the result needed. It's basically a crank-turning exercise, and he would often delegate most of the cranking to his beautiful assistant. A cynic would raise his eyebrows a mile high at the thought of someone charging £300+VAT (or more) for a couple of hours of work which isn't even accountancy but only bookkeeping.

Reply to
Ronald Raygun

Accountants don't need to expend thought to any great degree in this example because they have the knowledge.

You don't seem to be aware of the concept of value pricing.

Say a client needs an accountant to research a particular scenario and the accountant does so and presents a report and charges £1,000 which the client is happy with. Another client comes along and asks for exactly the same work to be done. Using your logical the accountant should give the report to the second client for free!

I'm not sure what it is that you are describing as bookkeeping. It's certainly nothing that I have suggested doing.

Maybe you should ask a couple of fools what they think, but I warn you, one will just spout insults and the other one will think that it's ok for all the country to use BST except HMRC!

There is another fool who thinks that a sole shareholder should just take a company's money whenever it suits him but he seems to have disappeared so I don't think you'll be seeing anymore rubbish from him for a while but you did say you respected his opinion!

Peter

Reply to
PeterSaxton

Thanks very much for all the tips and links :-)

Regarding mortgage interest being tax deductable, I have an interest- only mortgage on the property, so although my mortgage payments are not technically repayments, what I consider my 'mortgage' is in fact all interest. My estimated annual gross rental is £10k, 22% of which is £2200, yet my total mortgage interest payments for the year will be some £1500 in excess of the tax figure. Does that mean I will pay no income tax at all on the rental income?? It seems too good to be true!

Cheers, TC

Reply to
TC

Unfortunately not.

Gross Rental = 10k Mortgage Interest = 3k Profit = 7k

Tax @22% = 7k*.22 = 1.5k (approx)

One thing you might be able to do is utilize some capital drawdown to pay off some of the mortgage on your main home. That way more of the interest might be allowable against tax. (N.B. This is only a might and definitely isn't certain)

In the most extreme case where you are paying 7k (or more) of interest on the mortgage on your own home, effectively you can offset all of that against your rental income and pay no tax or even make a loss on your rental business.[1]

This is the sort of thing that an accountant will be able to advise you on.

[1] I'd be astonished if you had another tranche of borrowing costing you another 7k p.a. in interest and were a basic rate taxpayer although I suppose it's just about possible.

Tim.

Reply to
google

Ah, I see - cheers. I was calculating the 22% purely on the gross rental income rather than on the profits. Makes sense now. I guess I could probably do with an accountant after all...

TC

Reply to
TC

@'Goo': Given that other costs are tax-deductable as well (maintenance, insurance, agency commission etc) I take it those should also be deducted from the gross income before working out the profit for tax? In your example you've only deducted mortgage interest, but I guess this was just for illustration.

Thanks

TC

Reply to
TC

Yes.

And please don't toppost

Reply to
Tim Woodall

Thanks - sorry! Didn't think this mattered much these days with the 'show/hide quoted text' feature.

Reply to
TC

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