Taxation on small rental income?
Discussion
icamm said:
Isn't there a limit to rental income before you get taxed? (something like £3000pa) Or is this only for renting houses/letting rooms?
Sounds like the "Rent a Room" scheme - only applies to letting a furnished room in your main dwelling. You get an allowance of £4250 currently, but you can't deduct expenses from this.
>> Edited by pdV6 on Tuesday 21st December 15:42
The "poperty" purchased is generally treated as a capital cost, not an expense. Normal properties are not eligible for tax Capital Aloowances although there are some exeptions (agricultural property, manufacturing premises).
A container in normal circumstances would be eligible for Capital Allowances as an item of Plant and Machinery. There might be the possibility that a container being used as a "store" could also be eligible for Capital Allowances (40% of the cost of the container in the first year and 25% on the reducing balance for each successive year).
A container in normal circumstances would be eligible for Capital Allowances as an item of Plant and Machinery. There might be the possibility that a container being used as a "store" could also be eligible for Capital Allowances (40% of the cost of the container in the first year and 25% on the reducing balance for each successive year).
There is no such thing as "business" taxation when dealing with individuals. An individual is taxed on the income they receive - whether it be salary from a job (Schedule E), profits from a trade (Schedule D Cases I or II), rental income (Schedule A), income from financial investments (bank interest, dividends etc) or gains from sales of large/expensive (capital) property (Capital Gains Tax). The tax a person pays in any given tax year is based on the amalgamation of all income from all sources less the various allowances and reliefs that the individual may be entitled to.
If you are renting out a container as a store, I would hazard a guess that income derived from this activity would fall under Schedule A Rental Income (as opposed to Schedule D Cases I or II trading income). Capital Allowances are generally available for offset against business income (Schedule D) and CAN BE available against Rental Income (Schedule A) but in a much more restricted way. As the container is, in effect, the "Rented Property", the chances of being able to claim Capital Allowances against the Rental Income it generates are slim - in my opinion.
If the garage is jointly owned, at the very least the rental profits should be split 50:50 between yourself and your wife. That might go some way to mitigating the tax liability arising.
If you are "formally" married, you could gift the entire garage to your wife which would make the rental income generated entirely hers. Gifts bewteen spouses are totally ignored for Income Tax or Capital Gains Tax purposes. However, there are other issues involved in "gifting" assets e.g. Inheritance Tax or whether you really would want to pass to your wife your 50% ownership.
This option of gifting is not open to couples who are merely "living together".
>> Edited by Eric Mc on Wednesday 22 December 10:27
If you are renting out a container as a store, I would hazard a guess that income derived from this activity would fall under Schedule A Rental Income (as opposed to Schedule D Cases I or II trading income). Capital Allowances are generally available for offset against business income (Schedule D) and CAN BE available against Rental Income (Schedule A) but in a much more restricted way. As the container is, in effect, the "Rented Property", the chances of being able to claim Capital Allowances against the Rental Income it generates are slim - in my opinion.
If the garage is jointly owned, at the very least the rental profits should be split 50:50 between yourself and your wife. That might go some way to mitigating the tax liability arising.
If you are "formally" married, you could gift the entire garage to your wife which would make the rental income generated entirely hers. Gifts bewteen spouses are totally ignored for Income Tax or Capital Gains Tax purposes. However, there are other issues involved in "gifting" assets e.g. Inheritance Tax or whether you really would want to pass to your wife your 50% ownership.
This option of gifting is not open to couples who are merely "living together".
>> Edited by Eric Mc on Wednesday 22 December 10:27
I bought the container as a store for my stuff to free up the garage for rental (and 'cos I no longer live where the garage is) - it still makes sense long term, it's just that paying tax on the income lengthens the payback period.
Splitting the rent is definitely useful, I'll ponder whether I want to re-register it in her name.
Cheers for advice so far,
AdrianR
Splitting the rent is definitely useful, I'll ponder whether I want to re-register it in her name.
Cheers for advice so far,
AdrianR
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