As costs rise, landlords are looking at steps to save money and this includes looking how to save tax.
Writing for PropertyReporter.co.uk in June 2017, Warren Lewis showed several ways that landlords can make tax savings.
Most expenses can be offset against taxable profits. These include energy bills, insurance, letting agents’ fees, legal fees, ground rents, office expenses, and marketing costs. Landlord Richard Blanco said:
“Religiously keep all of your receipts so that you can offset absolutely every expense against your profits.”
Buying property will incur a 3% stamp duty. Instead, landlords can consider building an extension to existing property to add extra rental space. This will save stamp duty and the value added to the building could be more than the cost of the building work.
Tax relief on commercial mortgage interest payments is now a maximum of 20%. Landlords on an income tax band of more than 20% that have a spouse on 0% or 20% tax could transfer property to their spouse to save tax.
If property is sold, capital gains tax will be charged. The first £11,300 is not taxed. To take advantage of this tax relief, Lewis recommends selling no more than one property in each tax year.
Landlords with a number of houses could form a limited company to own the property. This will save tax, but there are other expenses associated with running a company. Financial advice is needed before taking this step.
Through careful planning, landlords can make sure that they are not paying too much tax.