Property Tax

There are a variety of different taxes relating to property, being income tax, corporation tax, capital gains tax (or losses), stamp duty tax and inheritance tax.

Likewise, there are a variety of different reliefs to include, rent a room relief, capital allowances, rollover relief and business assets disposal relief.  

There are also different types of properties; buy to lets, furnished holiday lets and commercial property. All of which are treated differently for relief and taxes.

We believe that it is crucial to understand you and your goals and aspirations. Knowing why you are investing in property and what you hope to achieve will help us to advise you on the best way forward for you.

In its basic form, in our opinion there are two types of landlords. The professional landlord - he or she may have a sizable portfolio where the properties achieve a surplus each month from rents received and business expenses incurred. This surplus is what the professional landlord will use to either reinvest or live on. Usually, the property portfolio is their only income. This type of landlord is often more interested in the trading profit than the long term capital gain. That is not to say that the capital gain (long term gain) is not important to them but their primary aim is to make a living.        

Buy to let landlords – these are often people with another income. They maybe self employed or employed through PAYE. They get their living another way either through business profits or salaried pay. Often these people do not want to make a profit for income tax purposes. Their primary aim is possible retirement planning or inheritance planning, or often both. It is important that tax is explained and understood properly, due to the changes in the tax treatment of mortgage interest, one or two buy to lets can easily push someone in to the higher rate tax bracket. The difficulty here is that there maybe a taxable profit but no actually increase in available cash.

This is one reason why many landlords have started to purchase property through limited companies, rather than owning them personally.

Managing a buy to let whilst holding down another job or business can sometimes feel like hard work and it may be some considerable time before you sell it and get some benefit from it. This is one of the reasons why FHLs (Furnished Holiday Lets) are becoming big business in the UK.  There are a number of rules that need to be adhered to for a property to be classed as a FHL for example they need to be available to be booked a minimum of 210 days per annum and actually be booked a minimum of 105 days per annum. However, buying a FHL can be attractive as you may benefit from holidaying there yourselves and therefore getting something out of it now, rather than years away when you sell.   

We may need to also keep monitoring you for VAT as holidays are a vatable service, should you reach a turnover (bookings) level of £85,000 or more per annum. Residential lettings (Buy to lets) are VAT exempt and therefore not a concern.

Lastly, we need to have an understanding of when and how you are going to sell up and cash in your chips. This may be as you sail off into the sunset as part of your retirement package or you may wish to pass them down to your family, or even a bit of both.

It is imperative that we understand the long-term plan in order to advise you correctly. There is not a one size fits all, we need to understand you, your income levels and your long-term aspirations for you and your family. This is necessary at the outset but also ongoing. We are aware that life often changes, family changes, plans change and unfortunately the tax rules can change.

Footprints Accountancy can help you with the relevant tax advice for you, annual tax returns, limited company accounts if you have purchased through a property company, retirement planning and inheritance planning.

Also, on a more practical level from April 2024, HMRC’s MTD (making tax digital) will apply to landlords with a property income over £10,000; we can help you with this too.