It’s really important to find a good accountant who specialises in property.  The aim of a good accountant is to help you make more money and pay less tax on your property portfolio.

Your accountant should be knowledgeable in the latest tax rulings that will affect you as a property investor. They should be driven to reduce your tax and to structure your property purchases in the most tax efficient way.

Renting out your property and Tax

You are required to pay tax on any profits that you receive from your rental income.  You can offset costs incurred from the rental income received; this will give your profit total.

Prospective New Tax rulings

At the time of writing though (February 2016) the government are trying to introduce new tax rules for the property investor.

The Chancellor wants to remove the landlords’ ability to deduct the cost of their mortgage interest from their rental income when they calculate a profit on which to pay tax.

In effect, Mr Osborne wants to tax landlords on their turnover rather than their profit, meaning that tax will be payable on non-existent income. So, landlords will have to pay all of their profit in tax, and then pay more tax still.

Currently more than 55,000 property investors have signed a petition to have this debated in parliament.

Buy to Let Tax Calculator

Telegraph Money has developed a buy-to-let tax calculator that gives an indication of how your profits be affected by the new tax over the next five years.

Click here to go to the Tax Calculator


Current Allowable Expenses

Current allowable expenses are things you need to spend money on in the day-to-day running of the property, like:

·        letting agents’ fees

·        legal fees for lets of a year or less, or for renewing a lease for less than 50 years

·        accountants’ fees

·        buildings and contents insurance

·        interest on property loans

·        maintenance and repairs to the property (but not improvements)

·        utility bills, like gas, water and electricity

·        rent, ground rent, service charges

·        Council Tax

·        services you pay for, like cleaning or gardening

·        other direct costs of letting the property, like phone calls, stationery and advertising

It is therefore important to keep good records and accounts of these allowable expenses.

The tax you pay will depend on your personal circumstances and you should seek the advice of an accountant.

All the repair and maintenance work that you carry out on your properties can be written down as tax-deductible expenses, so for the sake of keeping decent records and filing receipts and paperwork, you could save yourself money on your tax bill.

Furnished residential lettings

You can claim 10% of the net rent as a ‘wear and tear allowance’ for furniture and equipment you provide with a furnished residential letting. Net rent is the rent received, less any costs you pay that a tenant would usually pay, eg Council Tax.



Beating The Buy-To-Let Tax Changes

Any buy-to-let investments are now subject to a new, higher form of taxation. If you are one of the landlords affected, will you be able to cope with the new tax increases? In short, the changes mean that it is no longer possible to offset your mortgage interest against your profits and by 2020 none of the interest will be tax deductable. The result of this is a higher tax bill for many landlords across the UK. Taxation Changes The new rules only apply to private individual landlords, so those who own properties through companies should be unaffected. The changes to the rules mean that if you are one of the higher-rate tax payers, it is no longer possible to offset all of your mortgage interest against your rental income. If that income has not increased then you are likely to be hit with a higher tax bill. This is...
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What the New Tax Changes Mean for Landlords

As most of us in the residential property investment sector are already aware last Thursday saw the introduction of the first phase of a new government tax move to penalise landlords. Legislation cutting tax relief for higher earning landlords (those earning more than £40,000 per annum) will be phased out gradually over four years and replaced with a standard 20 per cent tax credit. Before April 6, higher earning landlords were able to deduct mortgage interest payments of up to 45 per cent from their tax bills. Like the 3% Stamp Duty on BTL and second homes, the new legislation is intended to hurt landlords in the pocket. And certainly, for some landlords, they’ll be paying more in tax than they make in profit. That’s because they’ll be charged on their full rental income (rather than just profit). Investor Steve Bolton, who led – and lost - a court challenge...
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How can landlords understand and cope with mortgage interest tax relief changes?

  Unless you have been living under a rock recently, you should be aware of some imminent alterations to mortgage interest tax relief. The changes are set to come into force this week (April 6th) and are sure to have implications for buy-to-let landlords and tenants alike.But just what is changing and what can investors do in order to cope, ultimately maximising their returns?Ryan Weston, of Just Landlord Insurance Services, explains:What is changing? ‘In the Summer Budget of 2015, then Chancellor George Osborne announced plans to alter how mortgage interest tax relief is calculated by buy-to-let landlords.Presently, landlords can cut their taxable income by deducting the cost of some expenses. These include letting agent fees, mortgage interest and repairs. Under the new legislation, landlords will still be able to deduct those costs, but cannot offset the cost of their mortgage interest from their rental income when working out profits.  Instead,...
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Why does the UK pay the highest rate of property tax in the world?

Did you know that the UK has the highest property taxes in the developed world? The government is squeezing home owners and businesses and showing no signs of relenting. New data has come to light which shows Britain is paying the highest rate of taxes on property purchases. OECD (Organisation for Economic Co-operation and Development) show that when purchasing a property, taxes made up 12.7% of the total burden in 2014, the latest year for which data is available. Since 2014, taxes have only increased with the likes of Stamp Duty changes in April 2016. This equates to taxes levied on property as a share of total taxation is higher in the UK than anywhere else in the developed world. The average tax burden across the 35 OECD members is more than half the UK figure. Since 1965 the average has fallen from 8% to 5.6% meanwhile the UK has...
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Calling UK Landlords: How to Get Prepared for Tax Relief Changes

As you may already know, there have been a lot of reports published by the press showing how young people in the UK are struggling to get onto the property ladder. In fact, they have been labelled as “generation rent”. Arguably, this is due to savvy investors choosing to make a good living through buy-to-let mortgages. To be more specific, a greater demand for properties drives up house prices and rent in certain areas. As a result, the government have decided to make a set of changes to tax relief. Arguably, this is a thinly veiled attempt to reduce the attractiveness of the buy-to-let investment strategy, thereby allowing more people to jump onto the property ladder. Depending on your investment strategy and financial strategy these changes could affect you. Let’s delve into the tax relief changes, and how you can use the information to gain a legal advantage. Notably, the...
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