Speeches, etc.

Margaret Thatcher

Article on Tax Schedule A

Document type: Speeches, interviews, etc.
Source: Finchley Press, 18 March 1960
Editorial comments: Item listed by date of publication.
Importance ranking: Minor
Word count: 2041
Themes: Taxation, Housing

To: Owner-Occupiers: How to Counter Schedule “A” Tax With The Bills For Your House Repairs

Do you qualify for a Refund?

By Margaret Thatcher (M.P. For Finchley and Friern Barnet)

With Budget Day looming into view, nobody knows how the controversial Schedule ‘A’ Tax upon owner-occupiers will be affected. Many MP's believe that the government should abolish a tax which puts a levy on the imaginary “rent” that a house would fetch if the owner let it to someone else. But whether Schedule ‘A’ is abolished or not, there is still time for owner-occupiers to act upon the advice offered in this special article by Mrs. Thatcher.

According to a Parliamentary answer last year, eleven-twelfths of owner-occupiers were not making claims for repairs and maintenance to their homes against Schedule ‘A’ Tax. This high proportion seems to indicate that many people who could make claims are not doing so—and probably are unaware that they can. Many might be able to claim a refund of tax for several past years.

Prospective house—purchasers usually know about the liabilities they will have to meet by way of repairs and rates, but they are not so familiar with the property tax which falls upon them as owner-occupiers under Schedule “A” . This article is intended to give a brief account of what the tax is, how the liability to pay is measured, and how much can be claimed against the tax as repair and maintenance expenses.

Schedule “A” tax on owner-occupiers yields over £25 million a year to the Exchequer and it is therefore important for individual owner-occupiers, who together contribute this sum, to know whether they are obtaining the maximum possible relief from it.


The income tax we have to pay is charged under five different schedules each relating to a different source of income, for example: wages and salaried income under Schedule “E” and income from a trade or profession carried on by a self-employed person is taxed under Schedule “D” . Income which derives from the ownership of land and property is charged under Schedule “A” . If land is let, the owner is paid rent, if however the owner chooses to occupy the land or house himself, he is enjoying in kind the rent he would otherwise receive in cash. He is therefore deemed to have an income from the ownership of his house equal to the rent forgone. The amount of this notional income is called the “annual value” , sometimes referred to as the “gross annual value” . It is defined as the rent at which the property is worth to be let by the year, on the conventional tenancy conditions.

Formerly, property was revalued every fifth year. It is the law that once the annual value has been determined it cannot be increased by the Revenue until a year of revaluation. The taxpayer however can lodge an appeal at any time for the reduction of the annual value. War and post-war difficulties have prevented any revaluation since 1936, and the annual values determined in that year for properties then in existence are those still levied today.

In the case of houses built since 1936, the annual value is fixed according to the rent the house could command in the year in which it was first occupied. Where there has been some significant structural alteration to a house, it is considered to be a new property for Schedule “A” purposes and a new assessment of the annual value can be made. But once the annual values have been determined they cannot be increased in subsequent years until a year of revaluation.


Tax is not charged upon the whole gross annual value. An automatic reduction for repairs is allowed regardless of whether the owner-occupier spends more money on repairs or not. The repairs allowance is calculated as a fraction of the gross annual value. For houses where the gross annual value does not exceed £40, the allowance is one-quarter, where the gross annual value is more than £40, but does not exceed £100, the allowance is one-fifth subject to a minimum of £10, where the gross annual value is more than £100, the allowance is £20 plus one-sixth of the excess over £100. When the repairs allowance has been deducted from the gross annual value, the result is called the “net annual value” and it is this figure upon which tax is collected.

But the repairs allowance does not exhaust the relief obtainable. If the property owner consistently spends more upon the property than the repairs allowance, he can make a maintenance claim against the Schedule “A” tax.

A maintenance claim is worked on different principles from the repairs allowance. The latter is an automatic reduction of the tax charged, but the maintenance claim depends upon the amount actually spent on the property. A claim is competent when the owner shows that the average amount spent over the preceding five years in maintaining the property has exceeded the repairs allowance.

A few examples will make the position clear. Supposing the gross value of “Greenacre” is £50, the repairs allowance will therefore be £10; if for four successive years the owner spends no money on the property and then spends £50 in the fifth year, he will not be able to make a claim the following year, for his average annual expenditure over the five preceding years is £10 a year and this does not exceed the repairs allowance.

If however, sums of say £10, £20, £25, £35 and £15 are spent in the five respective years making a total of £105, an average of £21 a year has been spent, and this exceeds the repairs allowance of £10, by a sum of £11; a maintenance claim can then be made for £11 against the net annual value of £40 thus reducing the amount upon which tax is paid from £40, to £29.

The Schedule “A” tax can be completely neutralised by maintenance claims, but if the average annual expenditure is greater than the gross annual value, the excess does not rank for relief against other income.


As maintenance claims are based upon average expenditure over the preceding five years, the question arises, what happens in the case of a new owner? Details of the previous owner's expenditure can sometimes be obtained to make up the five year average. If they cannot, the Inspector of Taxes may admit a claim on the basis of the actual amount spent in each separate year until a five year average is built up. He will not do so if the initial expenditure of the new owner is very heavy.

For example, the cost of putting a house into good repair for occupation by a new owner may well run into £500. If the gross annual value is £100, the Inspector would consider this very heavy expenditure and would not allow a claim on the separate year basis. In fact it would probably not pay to claim on such a basis as the excess £400 would be unrelieved and would not be available to come into any future five year average.

The new owner's claim, therefore, in such a case would be on the five year basis; the first four years, being these in which the house belonged to the previous owner, would be assumed to have a nil expenditure, and the average for the five years would be £500 divided by 5=£100.

This would be sufficient to neutralise the Schedule “A” tax for the first year of claim, and the big figure of £500 would be brought into the five year average on four more occasions. The total relief would thus be greater than on the separate year basis.


In the words of the Income Tax Act, the kind of expenditure admissible in a maintenance claim is that spent upon ‘maintenance, repairs insurance and management” . Now, knocking a wall down, putting in another window where none existed before, and building a new garage to a house which hadn't got one, are clearly not repairs or maintenance, but are alterations to the property.

On the other hand repairs to the roof, putting in a new boiler to replace one worn out, renewing baths and sanitary appointments, electrical re-wiring, re-painting and redecorating outside and inside, all comes within the description of repairs and maintenance. If a new boiler is of a far superior kind compared to the old one, only part of the expense may be admitted on the grounds that the result was part repair and part improvement.

If very expensive wall paper at £3 or £4 a piece is used to decorate a room, this is embellishment rather than maintenance. But provided the outlay is in accordance with the kind of property, re-painting and re-decorating can be done as often as the owner desires—within reason—and is admissible expenditure.

Replacing boundary fences, often in appalling conditions, counts as maintenance. Insurance of the property against fire and damage is allowed, but not insurance of the contents.

Before allowing a claim the Inspector of Taxes will want to see receipts for the expenditure, or have other sufficient evidence of it. As the cost of repairs and maintenance is so high now compared with the days when the repair allowances were fixed, it seems likely that owner-occupiers would be able to claim more relief if they took the trouble to keep a record and proof of the actual expenditure. Even if the owner-occupier does the work himself he can claim for the cost of materials used, but he must make a point of noting down the expense and keeping the receipts.


It is important that the re-valuation for rating purposes should not be confused with the annual value for Schedule “A” . An alteration in the rating value for any property does not alter the annual value for Schedule “A” purposes once it has been determined. When the annual value is being fixed for the first time, or in a year of revaluation, regard is usually paid to the current rating valuation, but a later increase in the rating valuation does not affect the Schedule “A” annual value then in being, so that there may be a considerable divergence between the rateable value upon which the rates are calculated, and the net annual value upon which Schedule “A” tax is levied.

For some time, Parliament has been expected to provide for a year of revaluation for Schedule “A” purposes, but on the 15th April 1957, the Chancellor of the Exchequer was asked in the House of Commons if he would introduce legislation to reassess the value of property for the purposes of income tax Schedule “A” , and he replied that he did not propose to introduce such legislation this year (1957). Since then, there has been another Finance Act but that has left the position unchanged.


Tax under Schedule “A” is not a different kind of tax, but is merely part of the general income tax code. A person pays income tax upon his total income. The total income is found by adding together the amount of income arising under each of the five schedules. The reliefs, such as earned income relief, personal relief, child relief, and dependent relative reliefs are then deducted and the amount left is charged to income tax first at the reduced rates, and then at the standard rates, without regard to the Schedule in which that income originated. For persons who are becoming property-owners for the first time and who are intending to live in their own houses, the effect on the amount of tax paid of having income under Schedule “A” can best be illustrated by a few examples.

Suppose that a husband and wife have sufficient income under the other four schedules, that is B to E, to make them pay income tax at the standard rate. If they buy a house the net annual value will be added to that other income, and regarding it as the “top slice” , they will pay tax at the standard rate upon the additional amount. If on the other hand, that couple are only paying income tax at the reduced rate, the net annual value will also rank for reduced rate relief. At the other end of the scale, if husband and wife are paying income tax and surtax on their joint income, then regarding the net annual value as the top slice of their income, they will pay upon it both income tax at the standard rate and surtax at the highest rate to which they are liable.

In all cases, providing the income is high enough to attract tax, that part of the amount payable which can be traced to Schedule “A” can be reduced or cancelled out by a maintenance claim. The choice is between spending more on the property or paying more tax.

Finally, this is not intended to be an exhaustive account of Schedule “A” tax, but an indication of how the tax works and the reliefs admissible against it. Full details can be obtained from the Inspector of Taxes of the local district in which the property is situated.