Landlords
Accountants for Landlords
With property taxation becoming increasingly complex, many landlords are feeling the burden of greater rules and higher tax rates. From the loss of higher rate tax relief on finance costs related to letting residential property, to changes in rates and reliefs for Capital Gains Tax, many landlords are unsure of their tax position. This is where Ellacotts can help you with your rental business, our expertise in property taxes ensures profits are calculated correctly, claiming tax reliefs where available and ensuring reporting requirements are met, whilst also giving planning advice to assist in achieving your short and longer term goals.
Tax returns
As an individual, if you rent out a property you own, you are required to complete a Self Assessment tax return (even if you make a loss after related expenditure). You will need to calculate and report your rental profits on your tax return and pay the tax due on them – due each year by 31 January following the end of the tax year (6 April to 5 April). When you begin to rent out a property, you should inform HM Revenue and Customs (HMRC) by 5 October following the end of the tax year of your first receipt. Failure to do so can result in interest and penalties.
If you are in receipt of rental profits that have not been declared, you may be able to reduce interest and penalties by disclosing earlier years income to HMRC via their Let Property Campaign. We are able to help with the voluntary disclosures required when putting right your taxes, appealing penalties and provide ongoing guidance to help you meet any future tax obligations.
Mortgage interest relief restriction
From 6 April 2020, the higher rate relief for interest on loans for residential properties was abolished. After this date, interest on mortgages only receives a 20% tax reduction relief, rather than relief at the taxpayer’s marginal rate. This affects all higher rate and additional rate taxpayers who receive rental income on properties that have mortgages outstanding on them.
Selling your residential property
UK Residential Property sales are now reportable to HMRC within 60 days of completion, and the Capital Gains Tax due on the sale is payable by the same date. With the removal of tax reliefs such as Lettings Relief and the reduction of the CGT Annual Exempt Amount, currently only £3,000 for the 2024/25 tax year, considerable gains can arise on the sale of your rental property. CGT is charged on the gain at 18%/24% depending on your individual tax band. Advice should be sought before the sale to ensure all allowable deductions are included to reduce this gain, and the online reporting obligations are met. Our Tax team at Ellacotts are experts in CGT calculations for the sale of residential property and can provide support with the preparation of the required UK Property Return on sale.
Non-resident landlords and indirectly held UK property
From April 2015, non-UK residents became subject to UK Capital Gains Tax on the sale of a residential property situated in the UK. The rules do provide the option of rebasing the cost of the property to the market value at April 2015, meaning any property purchased some time ago would benefit from an uplifted based cost. You must report any capital gains within 60 days of the conveyancing even if you already complete a UK Self Assessment tax return.
Rent-a-Room relief
If you rent a room in your own property, you can receive up to £7,500 per annum exempt from tax under the Rent-a-Room scheme, giving a considerable tax saving compared with the standard deduction of expenses. If your receipts from renting a room are less than £7,500, you may not even be required to complete a self assessment tax return, depending on your individual circumstances.
Jointly owned property
Most jointly owned properties are held as joint tenants where each of you own half of the whole of the property. Your share would then normally pass to your spouse on death and this would overwrite any differing instruction in your Will. This might not be the best way to own rental property for a number of reasons. On death it can increase the survivor’s estate unnecessarily and generate higher Inheritance Tax bills and it can prevent you from sharing rental income in the most tax efficient way. Ellacotts can help advise on tax efficient ways to hold property jointly, for both income tax and inheritance tax purposes.
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Birmingham
Kettering
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Kettering
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