Top tips on optimising your tax position

According to Rightmove, of 1300 landlords and new investors that they canvassed recently, 58% said that the main thing on their minds at the moment, is the situation with tax.

This is, in our view, being exacerbated by the current political turmoil and we await the Autumn Budget with trepidation.

As you know we are letting agents – no, we are great letting agents, so I have no qualifications to talk to you about tax! However I do know who to talk to when it comes to advice.

Toni's tips

Toni Hunter from George Hay Chartered Accountants has come up with nine handy tax tips that hopefully will give you food for thought.

1. Make sure that you get bespoke expert advice – your situation will be personal to you. There is no ‘one plan that fits all’ and Google is definitely not the place to get this sort of advice. You need to make sure you understand what is the best tax structure for you and the portfolio you hold. Remember, whoever owns the property can have an impact on income and capital taxes.
2. Make sure you keep accurate records: the HMRC initiative Making Tax Digital (MTD) for Self Assessment comes into effect from April 6 2024 (as I write it has been deferred twice so far). Landlords with gross rental income in excess of £10,000 will need to file a digital return every quarter. The right software and record-keeping will be a lifesaver when MTD becomes necessary.
3. Maximise your expenses: keeping your portfolio updated and ahead of the competition will mean that you have less void periods and happier tenants. Remember to keep a record of all your expenses in letting the property and understand which expenses are deductible against income tax and which are only given relief against capital gains tax.
4. Minimise tax: If you have a spouse, why not consider putting the property into joint names? This is often a great way to maximise Capital Gains Tax exemptions on future sales and minimise income tax if you’re in a different tax bracket or personal allowances for one spouse are not being totally used
5. Create a payment plan to avoid cash flow worries: Planning ahead to avoid cash flow is a great habit to get into. If you have an idea of your potential tax liability you can put a proportion of the rental money aside to pay your tax bill.
6. Work with a tax specialist: there are a huge number of considerations to be taken into account of. You need to understand the implications of how you set up your portfolio and also how you want to pass this on to your children.
7. Would a limited company work for you?: More directed at landlords at the beginning of your property journey as it can be an expensive and time consuming transition if you decide later. It depends on the number of properties you intend to hold as investments and what your income and inheritance strategies are. Less than five, most probably will not be worth it. You need to be aware of the added burden of preparing accounts and other company related costs.
8. Register for self-assessment: registering for self-assessment is a must for new landlords. Ensure that you register with HMRC for self-assessment by 5th October following the end of the tax year in which you start to receive rental income.
9. Use a managing agent: there are 179 pieces of legislation that effect landlord and tenant law. The Renters Reform bill will bring in a few more! Fees, commission and management charges are all tax-deductible. So using a qualified agent can be a more efficient and stress-free way to handle your property if you don’t want to deal with it yourself.

Hopefully the message is clear, property taxes are complex and need to be considered in advance.  If you want to have a no obligation chat about your situation, just give Toni a call on 01480 426500