You might have to pay tax if you receive income from renting a property. Most importantly you have to declare the property income to the HMRC, even if you are making a loss. We have a fixed fee property tax service designed for residential landlords. It includes the preparation of rental accounts and the tax return. It does not matter if you are a buy to let landlord, a property developer, or investor we will be able to help you.
Property tax is quite complicated and we can advise you on many property tax areas such as:
- Tax reduction strategies for rental income
- What is a repair and tax deductible and what is an improvement and not
- Trading income versus Capital Gain considerations and advice
- Capital Gains rollover and holdover considerations
- Stamp duty planning
- Making the most of the Principal Private Residence election, letting relief, etc
- Tax issues on the sale of part of your residence
- Second homes
- VAT considerations of property deals
Property tax summary
- If the owner of the property is an individual, couple or a trust the rental profits are charged to income tax for the tax year to 5th April.
- If the owner is a company, the profits are charged to corporation tax for the accounting period of the company. Allowable expenses are those who relate to only the immediate period. Usually they do not affect more than one year. The costs incurred must also be wholly and exclusively for the purposes of the letting. Interest payable on a loan to acquire or improve the property is an allowable expense.
Capital allowances are not available on plant and machinery used in dwellings. However, owners of furnished properties can claim a relief – Wear and Tear allowance. This is used instead of the actual costs of replacing furnishings in the tax year. From April 2016, this is going to be replaced by relief for actual replacement costs.
- The expenses and income of different properties owned by one person are pooled together in any one tax year. This way we reach an overall profit or loss for the letting business. Any overall losses are normally carried forward to set against future rental income.
- The cost of repairs can be set against the rental income. However, it is often not easy to distinguish between repairs and improvements. If a fixture is replaced with a similar fixture this will usually be an allowable expense as a repair. Where a new fixture is installed, or the replacement fixture represents an improvement, no tax deduction is allowed. The property tax relief for the improvements is given when the property is sold.
- There are special rules which apply to properties which qualify for furnished holiday lettings.
Capital gains on the sale of buy to let properties are taxed at 18% or 28%.