November 2024 Newsletter | Cylchlythyr Misol Tachwedd 2024
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There are now less than 75 days until the self-assessment tax deadline of 31 January 2025. If you have not yet arranged your tax return submission, please get in touch.
Data recently published by HMRC shows that late-filing fees have hit a 5-year high. Remember that if you miss the filing deadline, there is an immediate penalty of £100, before HMRC increase the penalty by £10 a day for the next 90 days until the tax return is filed.
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As we near Christmas, continue to remain aware of scams. At this time of year, scammers know that we will be expecting emails from parcel delivery providers and can therefore steal significant funds by impersonating genuine delivery businesses.
If the details of the items being delivered do not match what you have ordered, or critically, if the email address used does not appear genuine, please triple check before divulging any personal information.
Ask Huw and Aled
Q: I am a higher rate taxpayer and I am considering purchasing a couple of rental properties to diversify my income stream. I am contemplating purchasing the properties via a new limited company so that the rental profits are taxed at corporation tax rates instead of 40% income tax. What are your thoughts?
A: Each individual's circumstances need to be reviewed in detail before any advice can be given. However, broadly speaking, if you are a higher rate taxpayer and you are not expecting to depend on the rental income for your day-to-day living costs, leading to the rental amounts accumulating in a bank account, it may be beneficial to own the properties via a limited company.
This is because any rental profits would be taxed at 19% (for profits below £50,000), which is a significant saving compared to the 40% income tax payable if they were owned as an individual.
The accumulated funds within the company can then be used to purchase future properties, if desired, or invested in other ways.The main tax benefits of operating via a limited company usually arise if the income can stay within the company. If you require the funds that are accumulating in the company for personal purposes, you will pay income tax of 33.75% on any dividends taken out of the company (as a higher rate taxpayer), thus eroding the tax benefits of operating via a limited company.
If you will be relying on the rental income to help meet your day-to-day living costs, and do not intend to purchase future rental properties, then it is often both tax-efficient and practical to own the properties as an individual.
Each scenario needs to be reviewed on a case-by-case basis, with regards to the individual's current income status, their plans for the future and the mortgage availability for the property purchase. Please get in touch if you wish for us to review your circumstances.
