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Property Tax
Tax Affinity Accountants are expert accountants with regards to land and property. Our experienced accountants and their key specific knowledge in the property industry is considered to be a market leader.
We offer a great range of property tax advice and have many clients who are developers and estate agents as well as private landlords with rental properties. |
If you have more than one property in the UK, and it is providing an income or loss to you. Then you a legal obligation to declare this to HMRC. There are many ways in which you can maxmise your income and minimise your tax bill. Feel free to contact us and we would be happy to help. Below are a few helpful tips on how to reduce your property tax:
Tax Tips for Landlords
If your properties are rented out, income tax will need to be paid out on these which will be the difference between the rents charged in a tax year less any allowable expenses and charges.
Tax allowable expenses include:
Holiday Homes
To qualify as a furnished holiday letting the property has to be let for at least 70 days and should be available for letting for 140 days in any one tax year. In addition, you can qualify for certain tax benefits if you can prove that no single letting exceeded 31 days. Unlike residential and commercial lettings, furnished holiday lets have to abide by the trading principles applied on them which means that you can take advantage of favourable relief for any loss you make on renting the property AND on any profit you make when sold.
Upcoming Changes:
In April 2012, a legislation will be introduced which will increase the requirements to satisfy the furnished holiday lettings rules. The property will need to be let for 105 days and actually let for 210 days in any one tax year. Importantly, as a business from UK or EEA, you will only be able to offset your losses against your future profits of the same holiday letting business.
Our expert accountants are more than happy to give you guidance and advice on the upcoming changes and how the changes might affect you. For a further discussion please contact us on the number below.
Renting out a room?
If you are letting a room or rooms in your own house, you will not be liable to pay tax if the total rent charged is below £4,250 per tax year.
Tax Tips for Landlords
If your properties are rented out, income tax will need to be paid out on these which will be the difference between the rents charged in a tax year less any allowable expenses and charges.
Tax allowable expenses include:
- Mortgage interst / loan interest – The interest charged on the element of the loan relating to the purchase of property can be claimed as a tax allowable expense which also includes incidental cost of securing the finance however, you cannot claim the capital element of the loan repayments.
- Cost of Repairs – It is very important to be clear about the difference between repairs and improvements. You are allowed to claim the expenditure incurred as a tax allowable expense if you are paying to maintain the property in its current condition. but, if you have paid to improve the condition and value of the property, HMRC can argue that the expenditure incurred is an improvement and so is not allowed as a deduction on income tax. Therefore it is important to keep in mind that although you cannot use the expenditure incurred on improvement as a tax allowable expense, it can and should be claimed against any capital gains tax when you sell the property. There are some exceptions to this rule eg replacement of outdated items like single glazed windows with double glazing.
- Replacement of furniture – If you rent out a fully furnished residential property, HMRC will allow you to make a deduction for the depreciation and replacement of furniture. It can be done in two ways:
- An annual 10% wear and tear allowance, the allowance is 10% of gross rents receivable after deducting any rates, paid by the landlord.
- The
actual cost of replacing the furniture, but there is no allowance permitted for the initial
cost furnishing the property. You
need to choose the method of claim before you let out the property. It is
important that you understand both methods and make your decision carefully as
it will be applied 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. Please
contact us to get more details
- Vat Registration – for both developers and landlords, if your situation makes you eligible you can voluntarily become VAT registered to recoup 20% of all input VAT costs for materials and labour charges paid for your property. This technical issue needs specialist knowledge and we would be happy to provide this should you so need.
Holiday Homes
To qualify as a furnished holiday letting the property has to be let for at least 70 days and should be available for letting for 140 days in any one tax year. In addition, you can qualify for certain tax benefits if you can prove that no single letting exceeded 31 days. Unlike residential and commercial lettings, furnished holiday lets have to abide by the trading principles applied on them which means that you can take advantage of favourable relief for any loss you make on renting the property AND on any profit you make when sold.
Upcoming Changes:
In April 2012, a legislation will be introduced which will increase the requirements to satisfy the furnished holiday lettings rules. The property will need to be let for 105 days and actually let for 210 days in any one tax year. Importantly, as a business from UK or EEA, you will only be able to offset your losses against your future profits of the same holiday letting business.
Our expert accountants are more than happy to give you guidance and advice on the upcoming changes and how the changes might affect you. For a further discussion please contact us on the number below.
Renting out a room?
If you are letting a room or rooms in your own house, you will not be liable to pay tax if the total rent charged is below £4,250 per tax year.
How we can help
Only a few sample areas have been listed here. So if you are
about to buy, sell, or let either residential or commercial property, make sure to get in touch to discuss any of the issues raised, call today on 0800 043 4051 or complete our contact form.