UK Tax

UK tax questions? Ask a UK tax advisor for answers ASAP

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

Hi, I have just spent 25k renovating a flat which I bought…

Hi, I have just spent 25k...
Hi,

I have just spent 25k renovating a flat which I bought six months ago and my daughter will live there. I will also stay there occasionally but it will not be my primary residence. The flat was uninhabitable so the costs are for maintenance and repair. My daughter will pay something towards her keep (roughly a third of market rent). How do I avoid tax on this and can I use the money I have spent repairing the flat against future tax? If so, how long can I use this money to offest tax? Is there another way around this?

Best Wishes,
Paul
Show More
Show Less
Ask Your Own UK Tax Question
Answered in 18 minutes by:
4/8/2013
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,000
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Verified
Hi.

Since the flat is being let at a reduced rent to your daughter, you cannot treat the expenses in the same way as you would if they were incurred on a commercially let property. They can be deducted up to the level of the rent received but the excess cannot be carried forward. Take a look at the notes in PIM2220 here on the HMRC website.

Since the renovation expenditure was incurred prior to the letting, you would be better off adding it to the cost of the property so that it reduces your capital gain if and when you sell it.

I hope this helps but let me know if you have any further questions.
Ask Your Own UK Tax Question
Customer reply replied 5 years ago

Thanks for this, I have had a look at PIM2220 and I'm interested in the pararaph:


 


"This means that the uncommercially let property produces neither a profit nor a loss, but the excess expenses cannot be carried forward to be used in a later year."


 


How do I ensure that it does not produce a profit, IE what can I do about this besides offsetting against maintenance/repair costs?


 


Best,


Paul

If the flat is fully furnished at your expense, you can claim an annual wear and tear allowance which is 10% of the rental income regardless of whether you replace any furnishings or not.

A list of the types of expenses you can claim can be found here.

If you are married and your spouse does not have any income or her income is less than the personal allowance you night consider putting the property in her name to reduce any tax exposure.

The only other way of ensuring that you don't have a taxable profit is to either not charge any rent or charge a much lower amount than you are intending to which will always be covered by expenses.
Ask Your Own UK Tax Question
Customer reply replied 5 years ago

Thanks for that answer.


One more issue I would like you to deal with.


I am thinking of creating a trust with myself and wife as trustees, into which all the rental income will be placed for the children (or ourselves if we need to) to use at a later date.


Can you tell me how this could operate for our benefit and if this would be tax efficient.


 


Best,


Paul

Can you tell me what ages your children are please. How would the income be used and when? How much income will be generated from rents? Isd there a mortgage on the property?
Ask Your Own UK Tax Question
Customer reply replied 5 years ago

Hi,


 


I have three children all in their twenties (20/23/26). Income generated from rent will be about 6-7k per annum before deductions. There is no mortgage on the property, I bought it with cash left to me by my late mother.


The income would be used at a later date (unless there is an emergency) at least 5-10 years hence. I don't want it to be a gift to the children because myself or partner may need it. We need to be able to control the money.


 


 


Best,


Paul


 

Thanks.

Leave this with me and I'll get back you later.
Ask Your Own UK Tax Question
Hi again.

Trust tax is a complex area and your original question was about letting a property to your daughter so strictly, it should have been posted as a separate question but I;ll deal with it here.

I'm not sure how you think you will benefit by setting up a trust and I can tell you that the tax advantages they used to afford are largely gone. Take a look here for more information on trusts to get an idea of their complexity.

You would need to gift the property into a trust. This will be a chargeable lifetime transfer which will eat into your nil-rate Inheritance Tax band of £325,000. If the property is worth more than that, you will have an immediate charge to Inheritance Tax at 20% of the excess over £325,000. The gift would also be a disposal for Capital Gains Tax purposes and in order to avoid a charge to CGT on any gain if there was one, you would need to make a holdover election which you can read about here.

The trust would need to have an annual trust tax return completed and submitted to the tax office. The level of tax the trust would have to pay would depend on what type of trust it was. Take a look here for more information on that.

If you set up a trust of which you are the "settlor" and also a beneficiary, you will be taxed on all the income received by the trust even of it is not paid out to you unless the assets and funds held in the trust are allocated to specific beneficiaries. Take a look here for information on settlor interested trusts. There could also be Inheritance Tax charges at 6% of the value of the trust assets at each ten year anniversary and an exit charge when the trust comes to an end. You can read about those here.

Given the level of income that the trust will produce, the work, time and professional costs that will be required to maintain it and the tax implications, if I were you I would not put the property into a trust. You might consider consulting a trust specialist for a more detailed appraisal of your situation as I can only give you a few pointers here.
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,000
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
Verified
Tony Tax and 87 other UK Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 5 years ago


Thanks for this.


 


Best,


Paul

Thanks.
Ask Your Own UK Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with an uk tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Tony Tax Your Own Question
Tony Tax
Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
Satisfied Customers: 16,000
16,000 Satisfied Customers
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.

Tony Tax is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Sam

Sam

Accountant

6,546 satisfied customers

26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax

bigduckontax

bigduckontax

Accountant

931 satisfied customers

FCCA FCMA CGMA ACIS

TEAP007

TEAP007

Tax Preparer

759 satisfied customers

Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years

Andrew Baker(baktax)

Andrew Baker(baktax)

Personal Tax Adviser

756 satisfied customers

35+ years experience in income tax, CGT, non-residence

berduchwal

berduchwal

Accountant

669 satisfied customers

Qualified accountant and bookkeeper running my own practice since 2008.

Clare

Clare

Solicitor

148 satisfied customers

25 years exeperience as a high street solcitor

Mrs-Tax

Mrs-Tax

Tax Adviser

59 satisfied customers

Law Degree, 19 years in UK Tax.

< Previous | Next >

Related UK Tax Questions
I am CIS registered and Ive had the last 2 years tax returtns
I am CIS registered and I've had the last 2 years tax returtns done, but when I look at my rebate it seems low. What can I do about claiming for tools, accomodation when away from home and vehicle cos… read more
taxonomy12
taxonomy12
64 satisfied customers
We purchased a flat in December 2011 in both mine and my wifes
We purchased a flat in December 2011 in both mine and my wifes names, with a view to renovating it and selling on I inderstand that we have a capital gains allowance of £10,200 each to offset against … read more
taxonomy12
taxonomy12
64 satisfied customers
Question; For investment properties on a NRL1 basis (landlord
Question; For investment properties on a NRL1 basis (landlord living aborad) can you claim the interest of a personal loan which was used for renovation purposes?… read more
taxonomy12
taxonomy12
64 satisfied customers
I have recently bought a one bedroom flat for buy to let purposes.
I have recently bought a one bedroom flat for buy to let purposes. The flat was in a poor state of repair and I have spent £4,500 on materials and £4,000 on a builder (7 weeks work) and the property w… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
I am a trustee of a trust which has converted a flat costing
I am a trustee of a trust which has converted a flat costing around £45,000 and also has borrowed £25,000. The rent will be about £18,000. Can the rent be used to pay off the loan and offset the addit… read more
Mrs-Tax
Mrs-Tax
Tax Adviser
Bachelor's Degree
59 satisfied customers
Hello, this is again Alisher. Id like again ask question
Hello, this is again Alisher. I'd like again ask question concerning my CGT tax liability. I hope you're available to answer. This time it is about our second property we just have been able to sell i… read more
berduchwal
berduchwal
Accountant
Licenciatura
669 satisfied customers
My wife (63 in July) and I (70 in September) jointly own a
My wife (63 in July) and I (70 in September) jointly own a residential property next door to us which we purchased 15 years ago and which we have rented out for the entire period. .. We share and decl… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,546 satisfied customers
Hi, I bought a flat for 65,000 in 1999, lived in it until
Hi, I bought a flat for £65,000 in 1999, lived in it until May 2004 at which point I rented it out. I rent a property with my partner at the moment and want to sell the flat....It is roughly worth £22… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
Almost a year ago My mother and I purchased a house at an auction.
Almost a year ago My mother and I purchased a house at an auction. Both our names are XXXXX XXXXX house title although my mothers name is XXXXX XXXXX withdrawn from title.Since buying the house I have… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
CAPITAL GAINS TAX UK - I bought 50% of a flat with my daughter
CAPITAL GAINS TAX UK - I bought 50% of a flat with my daughter in 1995 (£40K/£40K). My daughter lived in the flat. In 2001 my daughter sold her 1/2 share for £120K to her cousin who lived in the flat.… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,546 satisfied customers
I bought a property for 48000 in 2000 which was intended as
I bought a property for £48000 in 2000 which was intended as an investment. I rented it out for 1 year before my son moved in and failed to pay any rent. He stayed there until I sold it for £106,500 i… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
My ex wife & myself are about to sell our house we bought in
My ex wife & myself are about to sell our house we bought in 1985. we got Divorsed last October, after living apart for about 6 years. During this time she has remained in the property, I have lived a… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
I bought a flat for 57,000 and spent 20000 for improvements
I bought a flat for 57,000 and spent £20000 for improvements and fees, total £75,000, 8 years ago, then remorgaged 5 years later for 96 000 to help purchased the flat beneath which is clear of debt. T… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
hello sam, i bought an old fishermans cottage in a semi derelict
hello sam, i bought an old fishermans cottage in a semi derelict state in July 2007 (I am a self employed builder) for £250k. I spent about 40k on repairs + labour. It was left empty for the first 12m… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,546 satisfied customers
I own a property (a flat) that I bought in 1987. It was my
I own a property (a flat) that I bought in 1987. It was my main residence for 11 years and has sat empty for 12 years, since I met and moved in with my wife. I am a 40% tax payer but my wife if not, w… read more
Sam
Sam
Accountant
Higher Officer HMRC
6,546 satisfied customers
I have bought an old house 2 years ago which renovating and
I have bought an old house 2 years ago which renovating and it not quite fit to live in. Since money is tight I need to do all my repairs and that will take at least a further two years for the rest o… read more
Julie Kingham
Julie Kingham
Director
Chartered Tax Adviser
733 satisfied customers
I own a flat in London but am looking at my options in terms
I own a flat in London but am looking at my options in terms of selling or renting out. I officially bought the property for £100k in 2004/5 this was under value at the time it was worth about £385k a… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
I own a flat in Ednburgh which has been rented out in the past
I own a flat in Ednburgh which has been rented out in the past but which, for the past 13 months has been my main residence to be close to my 95 years old mother. Recently I've decided to return south… read more
Tony Tax
Tony Tax
Tax Consultant
High School or GED
16,000 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x