Some Tax Saving Strategies For Landlords
There are plenty of factors to take into account if you want to become a successful buy-to-let landlord, but one that often gets overlooked is tax efficiency. Putting a few tax saving strategies for landlords in place may not be quite as glamorous as hunting down the perfect property, but when it comes to saving cash it can make a huge difference to your bottom line.
That’s why we thought it would be a good idea to share a few tax saving tips for landlords with you here on our blog. Armed with these simple bits of advice, you’ll be able to significantly (and legally) reduce your tax bill as a landlord, which will help get your buy-to-let business in better shape in time for next year’s tax return.
Set up a limited company:
While it might require some planning creating the company as a limited company is an excellent way to lower the tax burden of landlord. In addition, you’ll be able buy properties by way of the business (which allows you to offset the cost against your profits) Additionally, you’ll be able to engage you or someone else to oversee the properties that are part of the portfolio.
This particular tax-saving technique isn’t suitable for all however, if it does work for you, the savings could be huge. Contact Account Ease to see whether you could benefit from the transfer of your property to an LLC.
Extend to reduce:
Putting money into your existing properties will help you avoid hefty stamp duty charges and should see the value of your portfolio rise at the same time. Recent changes to development rights means that you are now able to extend the property you have in place more than you did previously and this should result in an increase in your monthly earnings.
If you consider the cost of the region where your rental property is located, substantial benefits can be realized by the expansion or extension of your property. A thing to keep in mind is that if undertaking significant changes that will increase occupancy, you could be affected by the forthcoming revisions to HMO regulations.
In October (2017) properties that has 5 plus tenants is going to have to obtain an HMO license, which means passing the required inspections and committing to the expense of obtaining a licence as well. Therefore, make sure you examine the local council’s licensing regulations prior to undertaking any costly building project that could cause a change in the status of your rental property.
Make use of all available tax bands
Another option to cut the tax burden of landlord is to transfer your property into your partner. Capital Gains Tax generally is not a concern when assets are shared between spouses, which means you can effectively take advantage of their tax rates that are lower.
It is also possible that you’ll be in a position to pay less tax on the rental income if their tax bracket is less than your own. If the property isn’t a home with a mortgage to it and you’re not gaining any financial benefits from the transfer, then you don’t need to pay stamp duty.
Make sure you are getting the most from your property
This may seem like a bit of a no brainer at face value, but you’d be amazed at just how much money is left on the table each and every year by landlords who do not have their rental properties reassessed. Getting your rental property revalued can make a huge difference, not only in terms of how much it is worth, but also the way in which your business is viewed by outsiders.
Having a more accurate assessment of how much your rental property is worth will strengthen your hand against lenders and get them to reevaluate your loan to value. Should your rental property price increase, your loan to value will obviously go down…and that could mean more choice and a better interest rate for your buy-to-let business.
If you would like an accurate assessment of your property’s value, give our valuers a call on 0208 133 4599 to get started.
Don’t be shy with your expenses
Now, obviously we’re not suggesting anything untoward here, but we do recommend that you claim everything you are entitled to if you want to become a tax efficient landlord. There are plenty of landlords who could reduce their tax bills simply by being a little more diligent about their expenses, so our advice is to make sure you claim for everything.
Keep every receipt and speak to your tax advisor or accountant about exactly what you can and cannot claim for…you’ll likely be surprised by how quickly these landlord expenses mount up! For example, things such as the costs of keeping a home office and your letting agent’s fees can all be offset against your profits, so why not claim for them?
Consider short-term lets
If you are in between tenants, there are ways in which you can lower your landlord tax bill. Costs such as your council tax and utilities can all be claimed as expenses during this time, but wouldn’t you rather be earning money rather than saving?
Sometimes it can be worth considering the option of taking on a short-term let during a void period in order to get some money coming in. As ever, if you are based in East London or West Essex, we’d be delighted to assist, so give our lettings team a call on 020 8989 2091 today.
Be savvy when you sell
Too often, landlords lose money when they sell a rental property simply because they do not take full advantage of the available tax relief on offer to them. This is especially true of landlords with multiple properties, as they can reap the benefits of the 0% Capital Gains Tax band each and every year should they decide to sell one of their homes. Currently, the tax free figure stands at £11,300, which is a pretty good saving in anyone’s book.
Naturally, the best way to save tax as a landlord is to employ both a brilliant accountant and a reliable tax advisor who can assist you every step of the way. This article is intended to highlight a few ways in which landlords can lower their tax bills, but is not intended to be concrete advice.
If you are interested in becoming a landlord or would like to expand your property portfolio in UK, give us a call today on 0208 133 4599