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Buy-to-let: Essential tax advice for new landlords

Money house £10 billsThe glory days of the buy-to-let market are supposedly over, but according to UK Finance, new investors have taken out over five thousand buy-to-let mortgages in February 2018. If you’re considering doing the same, find out what the main BTL taxes are that you’ll deal with.

Purchasing your property

You can choose to buy a property either as an individual, as a joint owner or via a limited company. The tax implications will be different for each scenario, so you should speak to an accountant specialising in landlords to find out which option is the best for you and decide on a course of action appropriate to your situation.

There is a different Stamp Duty Land Tax (SDLT) system in place if you are buying a property that you do not plan to live in, but will choose to let out instead. There are six band rates, with only properties under £40,000 not attracting any SDLT. Anything over this is taxed between 3 to 15 percent.

Renting your property

You’ll need to register with HMRC and send them annual tax returns when renting out your property, otherwise you may face a fine. Tax rules vary for residential properties, furnished holiday lettings and commercial properties, and your tax bracket will determine how much tax you are required to pay. In every case, you’ll need to have a bookkeeping system in place to track your income and expenses.

You’ll have to pay income tax on rental profits, but there are certain expenses you can deduct from the rental income. There is a vast range of allowable expenditures including general maintenance and repair, letting agent fees, insurance, and direct costs of renting a property, which could include phone calls, stationery and advertising. Visit HMRC’s rental income tax guide for more information.

Mortgage interest tax relief

For those who own property as individuals and have taken out a buy-to-let mortgage, it’s important to know that the government has introduced a cut to mortgage interest tax relief. While before April 2017, mortgage interest payments were deductible from a landlord’s taxable income before they calculated their tax bill, buy-to-let investors will now have to pay tax on their full rental income and then claim back a basic tax deduction.

London’s local accountants saving landlords time, money and headaches

Whether you’re a portfolio landlord or letting your first property, managing your finances as a landlord can get complicated pretty fast. Tax Agility’s has experienced accountants to help keep your finances organised and help with landlord tax returns. We pride ourselves on being specialist accountants for landlords, aiming to help you make sense of the various tax implications that affect you. Our services give you access to a team of experts with specialist resources, providing you with a cost-effective solution to your accounting woes.

Call us today on 020 8108 0090 and find out how we operate local to landlords in London.

We’re chartered accountants serving clients in Putney, Wimbledon, Fulham, Richmond, Hammersmith and from our Central London office in Cavendish Square.