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Question

Tax (England)

Rent paid in advance

14 Jun 2020 | 3 comments

Hi, if rent is paid 6 months in advance in say Feb, for tax purposes is it all declared as rent for that month or is it divided by 6 and allocated for each month. If all declared for the one month it could push income tax in a higher bracket.

thanks.

Answer

3 Comments

  1. Imported

    13/11/2019 5:01 pm
    That’s a really good question and not sure of the answer.

    You could try calling the tax advisor on our website. He offers a free 10 minute consultation to Guild subscribers and will probably know the answer instantly.

    guildy

  2. Imported

    14/11/2019 4:34 pm
    This is the answer I received from the tax accountant.

    “Since April 2017, where individual landlords have gross annual rental income of £150k or less the ‘cash basis’ must by default be used (receipts and expenses are brought into account when they are received/paid). If the rental income exceeds this, or the landlord ‘elects’ (via box 5.2 on tax return UK property pages) not to apply the cash basis, the profits are instead determined in accordance with generally accepted accounting principles. This traditional accounting method means that receipts and expenses are calculated on a receivable and payable basis (so the rent received in advance would be taxed in the period(s) to which it relates rather than fully in the period of receipt).”

    Steve

    steve1

  3. Imported

    14/11/2019 10:56 pm

    Thanks so much for putting the reply here. It will be very useful for others we’re sure.

    guildy

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