So April 2017 hit and you may still be wondering what strategy you should adopt to ensure that the tax man gets his mitts on less of those shiny pennies of yours!
Obviously, everyone’s situation is unique, so you should seek the advice of a good tax lawyer or accountant, but here’s a few things to ponder to get you started.
1. Consider setting up a Limited Company to buy and own your property in. Companies will still be able to claim full tax relief on finance costs BUT you may have to stump up for capital gains tax and stamp duty if you transfer your portfolio from your private name. You may have to change your mortgage, and you’ll probably be charged more (typical!) but overall this scenario may save you money in the long run.
2. If you co-own a property with a spouse or partner, you might consider moving a larger proportion of the rent over to them – this may save one of you being tipped into the higher rate tax bracket, or above the child benefit threshold. Be careful though, later on, this could have an impact on capital gains or inheritance tax.
3. Holiday lets are exempt from the tax changes and currently you can claim full tax relief from any finance charges – happy days if you live in an area that lends itself to this and if you have the time to tend to it. This might be off the wall, especially if “hotelier” wasn’t on your list of preferred professions, but definitely some food for thought!
Even if you keep your properties in your own name privately, there are plenty of costs that are still deductible, so make sure that you are claiming for these; they include (but not exclusively – why how long have you got??) Letting and Management Fees (I know a good agent ;O)) , Advertising, Inventory preparation, crediting checking, landlord insurance, maintenance and repairs, Safety Certificates, Furniture, legal and accounting fees, service charges, ground rents, utility bills (either during void periods, or if the utilities are included in the rent) and admin costs associated with looking after your properties.
The main thing to do, before you invest another penny, is to seek out professional help to make sure that your hard-earned cash stays firmly in your pocket!
Leo Newman has a free downloadable booklet with more info, so if you’d like a free copy, just drop me a message with your email address, and if you have any suggestions to add, or corrections - do let me know (gently ;O)