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Ten Ways To Save Landlord Tax

Save landlord tax

Landlords at this time of year need to be gearing up for their latest landlord tax deadline. The Self Assessment Tax Return, including the figures relating to your property rental business.

Property Hawk has recently upgraded its’ free landlord software so that it is even simpler to use. Landlord tax could not be easier! Now we have a dedicated tax tab on the Property Manager 3.0s with all the functions that a landlord needs to calculate their tax liability.

Landlords confronted with compiling the land and property section on their rental business want tax saving strategies to make sure they pay the least amount of tax possible.

Here are Property Hawk’s top 10 tips to save property tax.

1. Claim for all your property expenses

Make sure that you claim for all your expenses when submitting your tax return. These should normally include:

• Costs incurred when travelling back-and-to the investment property
• Advertisement costs
• Telephone calls made (or text messages sent) in connection with the property
• Cost of safety certificates
• Cost of bank charges (i.e. overdraft)
• Advisory fees e.g. legal and accountancy
• Subscription to property investment related magazines, products and services

2. Splitting your rent

A little know tip is to consider putting your buy-to-let property into joint ownership, but then split the rent in the most tax efficient way.

3. Void period expenses

If for any reason your buy-to-let property is empty for any period of time; a so called void. Remember the expenses such as utilities or council tax incurred even when the rental property is empty can be claimed as a letting expense.

4. Every landlord has a ‘home office’

Even if you have just a single rental property; don’t forget that a landlord can claim expenses for running their rental business and the associated costs of running a home office. This is a minimum of £4 per week or £208 without having to provide written evidence of their expense deductions.

5. Landlords finance costs

Landlords that have borrowed money to purchase their buy-to-let property should ensure that they claim all the loan interest paid relating to the financing of their buy-to-let investments. This include where a landlord may have borrowed money form friends or family or taken on credit card or personal loan debt in connection with their rental business. Remember it is only the interest on the loan and not any capital repayments that can be claimed.

6. Carrying forward rental losses

Many landlords who have made significant ‘rental losses’ in previous years may not have even realised having never previously made a tax return. These landlords may now be making significant rental profits which they need to declare. They should therefore go back and calculate their rental losses from previous years. This is because these rental losses can be carried forward and set off against rental profits in subsequent tax years.

7. Capital gains avoidance

Landlords that are facing a large capital gains bill if they sell they buy-to-let property could avoid this if they are prepared to ‘move’ into their buy-to-let to claim Private Residence Relief ( PRR) potentially saving themselves tens of thousands of pounds in tax.

8. Replacement Domestic Items Relief (RDIR)

Landlords can claim against the replacement costs of furniture and fixtures in their rental property. It replaced Fair Wear & Tear allowance and came in from the 6th April 2016.  The property can be furnished or unfurnished and includes items such as:

  • movable furniture for example beds, free-standing wardrobes
  • furnishings for example curtains, linens, carpets, floor coverings
  • household appliances for example televisions, fridges, freezers
  • kitchenware for example crockery, cutlery

9. Apportionment

Key to maximising the amount of expenses a landlord can legitimately claim is the concept of apportionment and the ‘whole and exclusively’ test applied by the HMRC to letting expenses. Make sure you are not missing out!

10. Getting your tax return in on time

Finally, don’t be late. If you do want to be a minimum of £100 worse off then make sure that you get your tax return in before the 31 January. It will now have to be done online as the paper submission deadline has passed.

You will not however be able to submit your return electronically if there are any capital gains element to your return. This option is not available for landlords submitting their self assessment tax return online. Landlords however are still able to do it through an accountant with the right type of tax software.  If you are unsure on what your tax liabilities are then why not use our FREE income tax calculator.

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Please can you expand on the “Apportionment” method of saving tax? A practical example of how I can use it to save tax would be useful. Thanks in advance!

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