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Whether you let out one or multiple residential or commercial properties, the net returns you receive in capital appreciation and income, depend on various factors. We look at the key considerations to improve your net return and identify some of the most common pitfalls to avoid.

Keep on top of your records

If you are a landlord, errors in your bookkeeping can make it difficult to monitor your profits and keep track of expenses. Knowing your numbers is critical so you can forward plan. We can advise on how best to update your books monthly, make sure your books are reconciled and ensure you have captured all allowable expenses.

You should also bear in mind that from April 2024, landlords whose income from property exceeds £10,000 per year will come under the Making Tax Digital rules for their income tax bookkeeping and taxes. We can help you with digital solutions for your bookkeeping so you are ready to take advantage of the opportunities of improved visibility of your finances that Making Tax Digital will bring.

Stay up to date with the tax rules

In recent years, landlords have seen a number of significant tax changes with regards to stamp taxes, Capital Gains Tax (CGT) rules, furniture deductions and a notable change to the rules on the deductibility of interest payments. Landlords can no longer deduct all their finance costs from their residential property income. Instead, they receive a basic rate reduction against their income tax liability. This restriction does not apply to commercial property or to furnished holiday lettings. It also doesn’t apply to property owned via a limited company.

We can scrutinise your records and ensure all allowable expenses that can be claimed are claimed. Additionally, we can explain the restrictions which apply and successfully navigate you through the complex tax rules and ensure that you pay the tax you owe – and not a penny more.

Think about your business structure

The decision to hold or purchase property as an individual or as a company will create some significant tax effects and we can help determine the best way to hold your property investment. Our advisors can explain the tax differences between commercial and residential property purchases and help you build a long-term tax efficient plan. No single strategy or plan can be applied to every situation, we will make a tailored recommendation based on your unique circumstances.

Plan for your future

Some landlords view their property investment as a ‘retirement fund’ and look forward to the property supporting their lifestyle in later life. In some cases, landlords intend their property to be passed to a new generation and will be concerned to plan for this succession and any inheritance tax exposure. Alternatively, a landlord may wish to take advantage of the market and sell a property and release their equity. Whatever long term goals you have, we can help explain the tax consequences of decisions and help you structure your plans for maximum tax efficiency.

Maximise family allowances

It may make sense to gift some or all of any income-producing rental property you own to your spouse or civil partner to save tax.

Where you live with a spouse or civil partner it is possible to reduce your tax liabilities by ensuring that any property income is split in the most tax efficient way. This will generally mean allocating rental income to the lower tax rate payer, away from the higher rate taxpayer. This simple tax planning technique is easy to get wrong and you must ensure the correct transfers and elections are made.

There are several legal and practical considerations which need to be considered before you make any gift. You should also be aware that several conditions need to be satisfied for this to work. Generally, any gift must be to your spouse or civil partner from whom you have not separated, and it must be an unconditional gift.

At TaxAssist Accountants, we can guide you through this process so you can be fully confident that you have met all the conditions required, to take full advantage of any tax savings you may be entitled to.

Report property disposals correctly

As part of the drive for real time reporting of transactions, HMRC requires most disposals of UK residential property where UK tax is due to be reported within tight timeframes. Make sure you are aware of these rules:

UK residents

From 27th October 2021, a UK resident who has CGT to pay when they dispose of a UK residential property, must report and pay the CGT within 60 days of completion. Prior to this date, a 30-day deadline applied.

CGT changes for non-UK residents

The tax position is different for individuals who are not classed as UK residents. Non-UK residents must report all disposals of UK land (not just disposals of residential property), whether or not they realise a capital gain. This requirement also extends to disposals of shares in property-rich entities. Non-UK residents also have 60 days from the date of completion to report disposals and pay any tax due.

Correct past omissions

For landlords who have undeclared rental income, it is important to address any oversights sooner rather than later. The good news is HMRC has a special Let Property Campaign for landlords who have fallen behind with their tax returns. We can help you make a voluntary disclosure to correct prior years and get your affairs up to date.

By making a voluntary disclosure, you can usually expect a lower penalty than HMRC would normally charge, and we will ensure you obtain the best possible terms.

How can we help?

TaxAssist Accountants offer a comprehensive range of services to landlords, property investors and developers. If you need investment, legal or mortgage advice, we also have a range of expert providers that we would be happy to refer you to. Call us today on 0800 0523 555 or fill out our online enquiry form to arrange a free initial consultation.

Date published 6 Jul 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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