Property Tax Advice
TaxAssist Accountants are one of the largest accountancy providers in the UK; we offer a great range of property tax advice. You will pay no capital gains tax when you sell your family home as long as it has been used for the entire period of ownership, as your private residence.
But what do you do if you either have, or are considering the purchase of, a second home?
Individuals are charged Capital Gains Tax (CGT) in respect of profits made from selling, or otherwise disposing of assets. Although there is relief from tax for your main residence, any subsequent properties that you buy will be subject to capital gains tax on any profit on the sale. This applies to rental properties as well as holiday/weekend homes used by you and your family. There are ways to reduce the potential liability with various reliefs, which can sometimes negate the tax due completely
If you do own and personally use more than one property in the UK, it is possible to make an election to nominate which property should be treated as your main residence for tax purposes. We can advise on the implications of making such an election, the qualifying conditions that must be met and help to decide if it would be beneficial for you depending on your personal circumstances. There are strict time limits for making this election, which has to be filed with HM Revenue & Customs, so it is important that advice is sought promptly.
Tax Tips for Landlords!
If you rent out property you will pay income tax on the difference between the rents you have charged in a tax year, less any allowable expenses and charges.
Allowable expenses include:
- Repairs - If you pay to maintain your property in its existing condition, you can claim for the expenditure incurred. However if you improve the specification of the property, say replace kitchen units with a more expensive design, then HMRC may try and argue that the expenditure is an improvement. The cost of improving your property can be claimed against any capital gains tax when you sell the property, but will not be allowed as a deduction for income tax. There are currently concessions relating to insulation and also for replacing outdated items such as single glazed windows with double glazing.
- Mortgage or loan interest - You can claim for all the interest charged on the element of the loan relating to the purchase of the property, including the incidental cost of securing the finance. You cannot however, claim for the capital element of the loan repayments.
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Furniture replacement - If you let a residential property fully furnished, the Revenue will allow you to make a deduction for the depreciation and replacement of furniture. There are two ways in which you can do this.
a) An annual 10% wear and tear allowance - the allowance is 10% of gross rents receivable after deducting any rates, paid by the landlord, or
b) The actual cost of replacing the furniture, but there is no allowance permitted for the initial cost furnishing the property
You need to make up your mind which way to claim when you first let a property, as it will apply for the entire period of your ownership. It usually works out more tax efficient to claim the 10% wear and tear allowance, but you should seek advice as the benefits depend on your personal circumstances.
More tax tips for landlords can be found in our news section.
Holiday Homes
At present, if you rent property that qualifies as furnished holiday lettings, that is to say it is let for at least 70 days and is available for letting for 140 days in any one tax year, you will qualify for certain additional tax benefits providing that no single letting exceeds 31 days. Unlike residential and commercial lettings, furnished holiday lets have trading principles applied to them. This means you are able to take advantage of favourable relief for any loss you make on renting the property AND on any profit you make when sold.
Upcoming Changes:
Legislation will be introduced in Finance Bill 2010 to withdraw the furnished holiday lettings (FHL) rules from 2010-11. This will mean the tax treatment of FHL businesses will be the same as for other property businesses
Who is likely to be affected?
Individuals, partnerships and companies who let furnished holiday property situated within the EEA (but outside the UK), and who are liable to UK tax on the income and capital gains from the property.
Our accountants can provide guidance and advice on the upcoming changes and how they might affect you. For a further discussion please contact us on the number below.
Rent-a-room?
If you let rooms in your own house, you will not pay tax if the total rents charged are under £4,250 per tax year!
We can provide you with advice regarding all tax aspects of buying, selling and letting property. We have only included a few areas for you to consider on this web page. If you are about to invest in, dispose of, or let property do give us a call.
How we can help
If you would like to discuss any of the issues raised, please call us on 0845 0176961 or complete our enquiry form and we will call you back.
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Help and Advice
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