This is a guest article from Richard Grayson of Nicholsons Charted Accountants
You may decide to submit your Tax Return yourself rather than pay an accountant to do this. If so, then Good Luck! The UK has the largest tax code in the world, and unless your affairs are very straight forward, you run the risk of making a mistake, purely through ‘Not knowing what you don’t know’!
A cynic would think ‘‘You would say that, you are an accountant!’. That would be a fair comment and I can see the logic. I have long felt that the UK tax system is far too complex, and was pleased when the Office for Tax Simplification was set up by George Osborne. However, after 4 years, there has been a bit of tinkering around the edges, whilst 4 more Budgets have introduced more rules to confuse us all further!
So if I am in favour of you paying for help and advice, how can this be justified?
In fairly straight forward cases, we are hand holding and giving comfort that all allowable claims are being made. We should also be able to reassure that HMRC will not be able to find fault with our claims and re-open previous tax years, with the prospect of interest and penalties being applied if false claims are made.
In more complex cases (and also with some straight forward ones) a good accountant will look at the bigger picture, to see if property could be held in a more tax efficient manner, particularly where there are married couples or civil partners involved. With appropriate planning, and the submission of the correct tax elections, it may be possible to reduce the income tax liability of a couple without causing a problem further down the line.
Where the accountant should really be able to assist is when a sale or purchase is imminent, or where Inheritance Tax (IHT) is likely to be a problem. The correct planning needs doing at these times due to the large values involved in most property transactions, and the high rate of IHT @ 40%.
A good accountant would spot these potential problem areas through his/her knowledge of your asset position, and your financial plans for you and your family. It is difficult to put a value on this, as everyone’s circumstances are different. But returning to the point made at the beginning of this article, tax is a very complicated subject, and a little knowledge, sometimes gained from a friendly chat with a friend in the local pub, can be a dangerous thing - your friend will not carry insurance in case the advice he gives you is wrong!
What most people think is that an account or property tax person is only needed to ‘fill in’ the tax return – that’s NOT the case! The reason you need a professional is they can mitigate tax for you when you sell or a loved one inherits the property.
Property isn’t taxed separately to your income or other financial earnings, it is all taxed ‘as one’. A good example would be someone buying a buy to let who has kids, not seeking tax advice and then finding out that they have lost their child benefit as the rental income takes them over the maximum salary allowed.
The way I work with property is to employ a tax specialist at the start of my purchase, get them to fill in the first self-assessment. We then carry on doing this ourselves, but make sure we have our tax position reviewed annually so we take advantage and minimise tax bills when we can.
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