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TAX
is probably everyones least favourite subject. Not
at least because it reduces the amount of money in
our pockets. It can be hard knowing that the money
you have earned has to be shared with the Government
coffers. Tax is not nice but it is the law. There
is no way out of it so the best you can do is to make
your tax bill as low as possible while keeping within
the law. Can you do this? If you own and let out several
properties, you amalgamate the figures into one for
income and one for expenditure. This way you can offset
losses from one against profits from another.
Some
people will claim that this is not as hard to do as
many people think. With the ability to complete tax
returns on line and have the system work out your
tax liability for you, nearly everyone could have
a go. If your situation is simple, completing a tax
return is simple. If your life is a little more complex,
then you may need some help. After all, many people
have several streams of income and whilst it is relatively
easy to complete the tax mans boxes, you need to know
the figures first.
Many
new Investors will keep simple spreadsheets to note
expenditure and income relating to their property.
This is probably fine to begin with, however, as the
portfolio grows, so the complexity of the accounting
grows. If you decide to do it yourself, it would be
very much in your favour to keep up with ever changing
tax laws to ensure you are claiming all allowances
and offsetting all tax deductable items. Would you
have time for this? Would you be better spending your
time looking for the next investment property?
The
right Consultant should reduce your tax liability,
and save you a great deal of stress
If
you feel that the idea of tax is too taxing, you should
consider using an Accountant or Tax Consultant. Using
a professional will leave you free to concentrate
on your business, while they provide you with a financial
service that will minimise your taxes and maximise
your profits.
There
are many Accountants and Tax Consultants offering
tax and financial advice so choosing the right one
may seem like a hard task. Ultimately, you will be
dependent on their skill to balance the books, reduce
your tax liability to the minimum and keep the business
legal. Not all Accountants or Tax Consultants are
experts in all types of business. Some may offer an
excellent service to a self employed plumber, however,
will not necessarily know all laws surrounding a property
owning business. Some Investors claim that only an
Accountant who has their own investment property will
provide the best service and save you the most money.
Did
you know?
You can rent out part of your own home and
sign up to the Governments 'Rent a Room' scheme. You
are allowed a tax-free income of up to £4,250
from letting rooms in your home.
So what CAN you claim for?
-
Interest on property mortgages/loans up to the
original purchase price
-
Building and contents insurance
-
Maintenance and repairs to the property
-
Ground rents and service charges
-
Letting Agents fees
-
Utility bills if paid by the Landlord
-
Other direct costs e.g. vehicle, stationary, advertising,
telephone
-
Certain capital costs e.g. essential gardening
equipment
-
10% wear and tear allowance for furnished properties
only
What
you CANT claim for
-
Most capital costs including the property itself
or furniture
-
Personal expenses if they are not wholly incurred
in the running of the business
-
Losses made if the property is sold
For
tax purposes furnished UK holiday lettings and oversees
property income
is treated separately.
If
you pay tax through PAYE, and your taxable income
from property is less than £2,500, you can ask
for your PAYE tax code to be adjusted to collect the
tax due. Ask your Tax Office to send you form P810
to report your income each year.
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