Parents and landlords need to act now to avoid tax penalties


Parents and landlords need to act now to avoid penalty charges and take advantage of amnestys from HM Revenue & Customs.

Child Benefit

Since January 7th this year child benefit has been withdrawn on a sliding scale so homes where one person earns more than £60,000 are no longer eligible. 

Those earning more than £50,000 who choose to continue receiving the benefit have to repay some or all of it using a Self Assessment tax return.

According to HM Revenue & Customs, about 225,000 higher rate taxpayers who are in receipt of Child Benefit still need to register for Self Assessment by this Saturday (5th October) or risk facing a fine.

For every £100 of income earned between £50,000 and £60,000, 1% of child benefit will be taken back via your tax return.  For example if you earn £55,000, 50% of the benefit will have to be repaid.  Someone with two children who earns more than £60,000 a year would owe £438.

It is possible, however to hang on to all of your child benefit by paying more into your pension, as this will reduce your taxable income.  For example if you earn £55,000 and make £5,000 of pension contributions, this will cut your income to the £50,000 ceiling.

 

Rental Income

This month HM Revenue & Customs started an 18 month amnesty for landlords, during which they can declare unpaid tax on rental income and pay a reduced fine.

They amnesty could affect approximately 1.5million landlords who HMRC estimate could be underpaying tax by as much as £500million a year.

The scheme which runs until 1st April 2015 is aimed at the growing buy-to-let market, and offers reduced penalties to encourage landlords to own up to unpaid tax.

Landlords paying previously undeclared income will receive a reduced penalty as low as 10% of the sum owed instead of the usual 100%. 

Rental income is subject to income tax at the landlord’s marginal rate and has to be declared on a self-assessment tax return.  However, some costs can be set against rent to reduce the bill.

Costs that can be off-set against rental income include letting, mortgage interest and managing agents’ fees, building insurance, and repairs during the tenancy.  Landlords can also claim a tax deduction of up to £1,500 per property per year for insulation under the landlord’s energy saving allowance.


  • Date posted:
    02/10/2013
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