The most successful landlords all have one thing in common: they’ve got their taxes down pat. While capital gains give you financial freedom, it also means that landlords are obligated to pay taxes on all forms of income they generate. While doing your taxes as a landlord might not be as exciting or glamorous as looking for the perfect property, it greatly impacts your bottom line.
8 Tax-Saving Tips
Managing your landlord tax doesn’t have to be a nightmare. If it’s done right, you can reduce your tax bills! Here are eight of the top tax-saving tips for landlords in the UK:
Do not avoid your expenses
It may seem like a total no-brainer, but it’s surprising how often it happens. Avoiding your taxes is not recommended at all! The better alternative is to reduce the expense of your taxes via any of the strategies indicated in this guide.
Set up a limited company
While this isn’t the ideal set-up for all landowners, setting up a limited company can significantly reduce tax expenses.
A limited company is a business structure where your company is considered to be a legally distinct entity. What does this entail? For one, all purchases can be made on behalf of the company you own—which allows you to offset expenses against the profits.
Landowners can also hire an agent to manage their properties and portfolio.
Reassess your property
This may seem like a simple idea. Reassess your property to understand how much you save in taxes every year as a landlord. Having your property appraised determines its true market value, which should fetch a corresponding value for rentals and tax.
Choose short term occupants
Choosing short term tenants gives you ways to pay fewer landlord taxes. You can claim council tax and utilities as regular expenses, too.
Make use of all available tax bands
Capital Gains Tax typically isn’t paid when assets are moved between spouses, which means taking advantage of these lower tax bands. As a landlord, you could save on the tax bill by transferring assets to your spouse.
Paying less on rental income is also possible if your spouse has a lower tax bracket than you do!
Landlords should make it a practice to separate accounts and statements between rental revenue and property income tax returns. This way, no taxes have to be paid for revenue that is generated from tenants.
Claim all your expenses
Ensuring that you claim all your expenses when filing your tax return will increase what you earn. This usually includes:
- Phone calls or text messages sent regarding the rental property;
- Advertisement costs;
- Travel costs to and from the rental property;
- Bank charges; and
- Advisory fees (e.g., legal and accountancy).
File your tax returns completely and on time
Most importantly, file your tax returns completely and on time. Making the January 31 cutoff will save you a minimum of £100 and the trouble of going through additional attachments. For instance, capital gains elements in your tax returns cannot be submitted online, though accountants with the proper software can help you do so!
Ensuring you do your taxes correctly and on time is one of your most important responsibilities as a landlord. While it isn’t advisable to opt-out of doing those tax returns, you can employ any number of these tax-saving tips to save money on your tax returns. For a smooth experience, enlisting the help of professional accountants who can assist you each step of the way is your best bet.
Are you looking for a way to do cheap tax returns in London? We are a professional team of accountants here at Cheap Accountants in London, which is part of a well-recognized accounting firm in the UK. Our services include state of the art bookkeeping and taxation services for small businesses and individuals. Connect with us today to find out more about our services!