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  • Tax

    Is playing it safe always the best policy?

    Most accountants and tax advisers are not property specialists. Most landlords use accountants and tax advisers that are not property specialists. Landlords then end up paying more tax than they should be doing as most of these professionals act like unpaid tax collectors.

    Most are very risk averse and when there are lots of grey areas to do with property taxation as a landlord you don’t want an adviser that treats everything as black and white. I don’t think most landlords  realise the scale of the problem and mistakenly trust their advisers implicitly. There is very little incentive for an adviser to take any risks.

    It is beholden on professional landlords to get themselves clued up so they minimise the tax they pay.

    I like to think when I meet my accountant he knows he’s in for a tough time if he doesn’t know his stuff. I don’t expect him to be able to answer all the questions I throw at him but I do expect him to go away and do some research and then come back to me with options then it’s up to me how much risk I want to take. 

    Given the scale of the changes over the last few years, especially s24 it is simply not good enough for landlords to rely on non specialist advisers. Ideally landlords should know more than their accountants and by educating themselves properly they will save a lot of tax and increase the profitably of their businesses.
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    I always say that the best way is to get a specialist in an area rather than a generalist, it can help a lot.

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    Specialist Council Tax advisor (A.Inst.Pa) based in Gateshead, but working nationally for landlords and council tax payers.
    http://www.lgfa92.co.uk
    Posting as @CouncilTaxGuy on Twitter
    Why not look at our blog at http://www.lgfa92.co.uk/blog

    Any posts are my own opinion on legislation and may vary from your local authorities !

    I agree with you, worse still there are landlords who do their own taxes and only consult the man in the pub.
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    I think everyone should be able to do their own returns, whether s/a, partnership or ltd. co. (as I used to).  

    I think its outrageous that its now so complicated that we have to get professional advice.

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    If properties are individually owned and expenses limited to maintenance expenses and mortgage interest - subject to S24 - can you provide examples of savings provided by a specialist adviser or accountant, assuming no interest in incorporating?

    I am just wondering what the person completing their own self assessment tax return is missing.

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    At its simplest level, that’s correct and no need for an advisor.

    As you become a bigger player in the property game You must consider wider tax angles and planning opportunities.

    We’ve seen clients with £m’s in property doing a 3 line tax return. 


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    “As you become a bigger player in the property game You must consider wider tax angles and planning opportunities.”

    Inheritance tax is an obvious one, can you expand on the other wider tax angles and planning opportunities. 

    I probably fall in to the keeping simple category but am aware of CGT and IHT liabilities. 

    If I sell or give the properties away then I will have CGT to pay, if I don’t IHT will be payable at some stage, although can be delayed by leaving to a spouse.

    I appreciate any comments would be generic.
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    Little landlord tax test  ....

    1. Does the amount of rental income earned impact the calculation of taxable income ?
    2. Do all repairs qualify as a business expense ?
    3. Can stamp duty be claimed as a business expense?


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    Pete

    The Astute Landlord


    My thoughts are -

    1) yes, rental income added to other income, S24, when fully implemented will provide a 20% credit for mortgage interest which will not be deductible as a business expense.

    2) if repairs I would expect them to qualify providing property let - or letable? - and not considered an improvement which would be a capital expense - some exceptions like double glazing for single glazing.

    3) stamp duty a capital expense and will be offset against the gain for CGT purposes.

    Hopefully I’m right but happy to be corrected.

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    Clearly you have spent significant time and effort to deepen your tax knowledge .

    For accidental or part time landlords, paying tax compliance fees annually to an accountant may be the right thing for them personally, particularly if they are risk averse.
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    Pete

    The Astute Landlord


    I have been a landlord for over twenty years and would expect to have a reasonable understanding of the tax rules, that said I consider my knowledge as at a relatively basic level and I am always interested to read about wider tax angles and planning opportunities that I may have missed and would justify instructing a specialist.

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