Re income tax liability

If you let out part of your house you can get rent-a-room relief.

All your income is combined. You pay tax once the total exceeds your personal (5k) allowance.

tim

Wrong. That amount related to YOUR personal allowance not any individual venture.

In the case of the house you want to consider rent-a-room scheme.

If you are seriously doing anything like this I think, given your understanding of tax, you need an accountant.

Really? How much would that cost?

Sam J.

As much as they think you could afford, and maybe a little on top of that.

As much as who thinks I can afford? The IR or the accountant? I guess you can't mean the accountant, because accountants have set rates, don't they? They aren't going to work for someone who they think can't afford their fees, right?

Sam J.

Sam, Your questions are naive.

I know.

Sam J.

He means Value Pricing.

The concept is that you don't price per hour or per service. You price according to what you think the client can and will pay.

If the client can't or wont pay what you think is reasonable you don't accept the engagement.

Thanks for explaining it, Peter. But is a price (always or generally) agreed before the work is commenced?

Sam J.

Not usually. Most accountants still go by time but fixed fees are getting more popular.

That really surprises me! It's the only professional situation I think I've ever heard of where work is entered into without an agreement in advance of what the remuneration will be.

Don't you find yourselves with clients who (after the work is done) say that they think the fee is too high and refuse to pay? I mean, they are under no legal obligation to pay the fee if nothing specific was agreed at any point, are they? Conversely, I would have thought that most clients would be unwilling to hire a prefessional without the fee being agreed beforehand.

What am I missing? (I'm curious because I may be talking to an accountant tomorrow with a view to possibly asking for his services.)

Cheers,

Sam J.

In message , Sam J-effreys writes

Sam, be aware that Stickem's answers are cynical, not factual.

I tell them the rate per hour. The problem with fixed fees is that you can agree the fee but can you agree how long it will take? The client's accounts could be in a mess. There's no way of knowing how much work is involved until you get the raw data. I do some fixed fee work but I either agree what information I will receive or actually see it first. Even when you see it you have to do some basic checks before having an idea of what is involved.

I saw some statutory accounts yesterday which were prepared by an accountant and when I asked for a breakdown of the trade debtors at the year end I was told that the accountant asked the client what figure was reasonable and that's how they arrived at £25,000 exactly!

I know another accountant who doesn't make an effort to get quite big clients to do bank reconciliations or make proper postings. He compares the bank balance to the bank statement balance at the year end and then spreads the difference over the Profit and Loss Account and rest of the Balance Sheet using the previous years figures as a guide!

These accountants must be charging an effective rate of £250 an hour for a totally unprofessional service.

Thank you for the tip.

Please tell me if I understand this correctly:

I can rent a room for £4,250 p.a. (tax free) AND make up to £5035 profit, p.a. from my other enterprise, tax-free. That's £9285 p.a. income, that's exempt from income tax, yes?

TIA

Sam J.

That's the principle yes (I CBA to check if the numbers are correct).

Unless that is, you are in receipt of taxable payments from the Government.

tim

Thank you.

Like government hand-outs - income support and suchlike? No, I don't get anything like that.

Thanks,

Sam J.

PS, Is there any small print that says one can't rent two rooms for £2125 p.a. each and get the same tax relief on the total?

Also, is there any reason why I can't rent two rooms in my house to one tenant for £4250 p.a. in total and get this tax relief?

Thanks,

Sam J.

No

No