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Property Income: What’s Excluded?

Caravan Hire - not Property income

Property Income: What’s Excluded?

Are you running a property business or receiving income relating to a property? Then, do you know if all the income received is treated as ‘Property Income’ for tax purposes? Our article ‘Property Income: What’s Excluded? covers this tricky subject.

HMRC’s Property Income Manual will explain how certain types of income are treated.

Read on to find out more on:

  1. Types of excluded income
  2. Other income streams
  3. Why it matters
  4. Property Income Allowance
  5. How Onyx Accountants can help you

Types of excluded income

The following list are examples of income streams which are not normally treated as property income:

  • Hotels and guest houses
  • Caravan sites
  • Tied premises
  • Fishing concerns
  • Lodgers and tenants in your own home
  • Providing additional services to a tenant e.g cleaning, linen and meals
  • Letting surplus trade accommodation

So in most cases, income relating to any of the above will be treated as that of a trade or profession and NOT property income.

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Other Income Streams

In addition to the above, there are exclusions for other income streams too. Just because it may relate to the use of land or a property does not necessarily mean it will be treated the same way for tax. Here are a few examples:

  • Annual interest receipts
  • Income from the occupation of a commercially managed woodland
  • Income from mines and quarries
  • Market gardening

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Why Does it Matter?

Tax! Wrongly treating income as Property Income instead of from a trade makes for a very upset HMRC!

As a result, HMRC are very strict on applying case law and statute on the purpose and function of the income received.

For instance, for an unincorporated business, income derived from a trade will be subject to national insurance. However, if the income is declared as property income, this will not. In conclusion, an incorrect declaration will result in interest and penalties and can even lead to prosecution.

Sadly, many individuals are brought before the courts for disputes with HMRC relating to Property Income and Expenditure. Therefore, it is wise to make sure you know the rules.

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Is there a positive side?

Of course there is, HMRC are not that bad! HMRC introduced the Property Income Allowance. (PIA) to help where property income received is minimal.

Individuals in receipt of income, which can be correctly classified as property income, may not need to report the income on their tax return.

So for individuals. where their share of the annual property income received is £1,000 or less, this will be covered by the PIA. Therefore, it will be exempt from tax and will not need to be reported. However, taxpayers must still keep records of all receipts though, just incase!

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How Onyx Accountants can help you

Getting to grips with identifying the correct reporting method for all income types is what we do best.

At Onyx Accountants and Business Advisors , we have a dedicated team of Tax Specialists and Advisors who are ready to go through each and every transaction. This is why we believe that ‘Tax does not have to be taxing’, as HMRC once said! So let us do all the hard work leaving you to manage your lettings.

Get in Touch with Onyx

If you have any queries, or want to discuss further, please give us a call or e-mail us at  enquiries@onyx.accountants for a FREE no obligation consultation.

Got any questions or queries? If you have then our friendly team of tax specialists are happy to help. Just drop us a line! Call us on 0121 753 5522 or 01902 759 800.

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