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Taxback opportunity

It’s January which means only one thing for most landlords, yes it’s time to get to grips with their self assessment tax return. I’m no different.(If you think you may have over paid in previous years then please read on!)

I’m not looking forward to this years return. Having used up all my previous losses on my rental properties last year in the 2009-2010 tax year it’s looking like I’ll have made significant rental profits.

I’ve been using the new Property Manager 3.0 to compile my figures for this year ready to put them straight into my online tax return. I’m liking the new upgraded version and thanks to Jonathan for all his development work during the year.

I’ve just been adding in my mortgage interest payments.

One disappointment is that my legal costs incurred on an abortive purchase cannot be offset against rental income because the property did not enter my rental business, disappointing, but it is as it is.

Minimizing my tax liability

As always I’m keen to reduce to a minimum my tax liability. I have in previous articles written in detail about how to do this.

 Here is a recent article where I outline 10 ways landlords can save tax.

Have you paid too much tax?

Landlords are not all tax experts,so if you have been submitting your own tax return it could well be that you have over paid on your tax for years. Property Hawk has teamed up with a world expert on evaluating over payment of tax from an international as well as UK perspective. The average UK tax refund stands at £963. Have a look at the tax calculator to see how much you may be due.

My tax return

In the mean time I’ve got my work cut out filling out my self assessment tax return before the 31st January deadline. This year I’m determined to avoid the £100 fine for late submission.

I’m currently sorting through all my expenses for the year. Don’t forget things like the travel costs involved with the management of your buy-to-let properties. The mileage rate is 40p per mile up to 10,000 miles and then 25p thereafter (this rises to 45p from 2011/12).

Note the rule on expenses is the wholly and exclusively test put up by HMRC. In other words the expense should be wholly and exclusively used for your letting business. However, this test in my view is there to deter landlords putting in dubious claims for domestic expenses that would have been incurred by them anyway. It gives the HMRC the ‘whip hand’ in deciding the eligibility of the expense. If you can justify the expense with evidence and apply the apportionment rule to the expense then it would be a churlish tax official to not allow it. But beware it could happen so make sure you can clearly evidence your claim.

Good luck and remember to do a tax return even if you think you will make a tax loss. Given that the latest predictions are that interest rates are going to stay absurdly low for another 2-3 years. You too could be making big rental profits soon!

Overpaid tax – refund calculator

Have you any tips on tax then please share them by emailing your comments.

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