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March Question and Answer Corner
Newsletter issue - March 08.
Q. The Taxman has asked me about my rental income, but I've never made a profit from my let properties, so do I have to complete his form?
A. The Taxman is currently writing to people who he believes are letting properties, but that rental income is not shown on their tax returns. You do have to declare the rental income even if your interest payments and other expenses cancel it out to make a loss. You are not obliged to respond to the Taxman's letter, but if you don't things will only get worse.
Q. Is there anything I should do before the end of the tax year to save inheritance tax?
A. If you have not made any significant gifts of capital since 6 April 2007, you can give a total of £3,000 to individuals to use your annual inheritance tax exemption for 2007/08. If you did not make any similar gifts in 2006/07 you can give a total of £6,000 before 6 April 2008 and all those gifts will be exempt from inheritance tax. Make sure you leave enough time for your cheques to pass through the banking system before 6 April 2008, as otherwise the gifts will not be completed.
Q. Should I invest in an ISA now or wait until the new tax year?
A. The investment thresholds for ISAs are set for each tax year and cannot be carried over into the next tax year. The limit for 2007/08 is £3,000 for a cash ISA and the balance of up to £7000 in stocks and shares. These limits increase on 6 April 2008 to £3,600 and the balance up to £7,200 for stocks and shares. So if you don't invest before 6 April 2008 you have missed you 2007/08 ISA allowance, but you will have more scope with the higher investment limits in 2008/09.
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