Q&A November 2019

Q. I have bought a house as a buy-to-let investment, but it needs significant work before I let it out. Can I claim those costs back for tax purposes?

A. It depends on whether the property ‘needs’ the work doing. If it is legally safe to be let out in its current state, then you can still carry out the work and class it as ‘repairs’ which are allowable. If the property is in such a bad state that it cannot be let to anyone, even on a tiny rent, the costs are likely to count as ‘improvements’ and will not be allowable. We would need to look at the detail of what work is being done, and the context of your entire lettings business, before we give you a final answer.

Q. HMRC have written to me saying I missed a small pension worth about £800 a year from my last tax return. I also missed it off the last four tax returns. What should I do?

A. Always be upfront with HMRC. Tell them about all the missing amounts of pension income for all tax years. There may not be more tax to pay if the pension provider has already deducted tax at your marginal tax rate. However, if there is higher rate tax to pay there will also be interest due at 3% and possibly a penalty. By confessing all without delay you can qualify for a reduced penalty, down to say 15% of the tax due. We can help you with those penalty negotiations and may be able to get it suspended for up to two years.

You should seek advice about your specific circumstances before taking any action. Contact us if you have any questions or, if you would like to sign up to our monthly newsletter, please complete the form below.