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  • Tax

    Resources for reducing landlord tax liability



    As landlords are coming under tax pressure like never before, I thought it might be helpful to curate our top resources to help landlords reduce their tax liability.

    The links are most internal, but there are also some external ones, which I have marked as such.

    Here is a reprise of RITA's guide to mitigate the impact of Section 24:

    There are various strategies in mitigating section 24.  As mentioned, there is no one-size-fits-all solution, but popular suggestions are:

    1.    Exploring a Form 17 route.  
    This essentially alters the profit splits from the 50:50 split, allocating a greater share of the profits to the lower earner and therefore lower taxpayer.  Further details can be found on the PT thread here: https://www.propertytribes.com/use-your-s...12363.html

    2.    Incorporation and/or using a company for future purchases
    This is a popular consideration for some landlords, given mortgage interest and finance costs may still be claimed for properties held in a limited company.  

    Further benefits include a lower rate of tax compared to the higher personal tax rate, indexation allowance, potentially lower rates on selling properties, amongst others.  However on the flip side, personal allowances and annual exemptions in personal ownership would be lost, and whilst the tax rates are lower, extracting money from the company can attract further tax implications, not helped by the recent changes in dividends.  

    In addition, for those owning property personally, there can be benefits when selling a property you have lived in, whereas there can be serious consequences if you live in a company owned property.  If you are looking at transferring existing property to a company, unless you are able to benefit from incorporation relief, then you may be facing an immediate capital gain on sale, given an individual and a company are two separate legal entities.  

    There is a lot to weigh up here, and this is just scratching the surface, but advice is strongly recommended prior to making any big decisions as to whether incorporation is for you.

    3.    AVC Pension Contributions
    These can be a good mechanism to delay the point at which you start paying the higher rate of tax.  For a lot of landlords, your AVC pension contribution can extend the basic rate tax band, and therefore for example, expose a greater amount of your income to the 20% rate of tax, as opposed to the 40% rate of tax.

    4.    Gift Aid Donations
    For those who make charitable donations under the Gift Aid scheme, these have a similar mechanism to the above, and can again, delay the point at which you start paying a higher rate of tax.

    5.    Profit Sharing Agreement
    Landlords who own properties jointly, who are not married, may be able to benefit from a profit sharing agreement.  In some respects, this is similar to point 1 above, as a way of allocating a greater share of property profits to the lower earner as opposed to the higher earner.  Again, as with all these suggestions, it is best to seek professional advice here first, so as to ensure you are fully aware and understand the full theory here, as this is just a brief overview.

    6.    Pay Down Mortgages?
    Of course, the Section 24 changes affect those with mortgages, and so despite this being one suggestion, it is worth reviewing a before and after scenario here, as landlords could see a greater tax bill considering they would not receive the finance cost “reducer” in their tax calculation.  

    The best suggestion would be to see what would be left over in your bank account, explore what can be done with the excess money you have from not having to pay the mortgage any more, and explore how best this money can be invested.  Quite a lot of considerations on this one!

    7.    Increasing Rent
    This is one suggestion which may help mitigate the effects of Section 24, although again, care must be taken to review a before and after scenario.  Whilst there would be an increase in rent received, there would also then be a greater taxable profit to factor in, so a case therefore of weighing everything up.

    See - Changing landlord dynamics & rent rises

    8.    Exploring different property types
    The Section 24 changes affect residential properties, and so it may be worth exploring commercial property and/or furnished holiday lets.  

    With regards the latter, it may well be that one of your existing properties could be suitably converted into a Furnished Holiday Let, although you would still need to ensure it meets the criteria as otherwise it would revert back to a standard residential BTL.  The criteria is explained in greater detail in one of our previous posts Hedge your bets on holiday lets.

    9.   Sell poor performing property

    A more obvious one here, but if one of your properties within the portfolio is performing poorly, now is the time to review you affairs on the whole and make good decisions moving forward to plan to best effect. You could sell poorly performing properties and use any residual equity to reduce the LTV on your existing stock.

    Bamboo Auctions are offering you the opportunity to sell your property online with no entry fees. When talking to Bamboo, quote "Section 24 sucks" to qualify. 

    10.   And finally...

    Doing nothing is a very risky strategy.  Assess your position and understand the impact on you.  Plan ahead and stay informed.

    Other resources:

    Section 24 Landlord "Survival Guide" 

    Landlords' A to Z of property tax expenses 

    30 ways to save on tax - Which? magazine 

    Use Your Spouse To Save Tax - Form 17

    Inheritance Tax toolkit for landlords 

    Wealth management and tax planning 

    The BIG tax issue: Should I incorporate? 

    Others ways to reduce impact of S24 

    Re-Financing - Which Fees Are Tax-Deductible 

    Family trust 

    Can I gift BTL to my wife/son to avoid tax? 

    Taxable expenses 

    5-minute guide to tax-deductible expenses for a property rental business  

    Tips for landlord self-assessment tax returns 

    Valid method to incorporate with no tax? 

    Self-Assessment Wear and Tear Allowance Issue 

    Form 17 

    Personal tax return | What can I claim for? 

    When to create a Ltd company 

    Section 24 - unreported dangers that may bite 

    Tax advice on landlord mileage needed 

    Renovating an old bathroom - capital expense? 

    Mortgage arrangement fee - tax dedictible? 

    Declaration of Trust/Form 17 

    B2L in my name; now married & to split income 

    Buying on lower rate tax payer's name 

    Is Landlord licence payment tax-deductible? 

    5 Ways to Beat the Budget! 

    Tips for reducing landlord tax - Mortgage Advice Bureau

    Ultimate Guide to reducing the tax you pay on rental income - Upad 

    9 ways to reduce landlord tax liability - Telegraph

    Landlords' A - Z of property tax expenses - Video Guides 

    Use Your Spouse To Save Tax - Form 17 

    A reminder of our "Once Upon A Tax ..." series for newbie landlords:


    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 1 

    Once Upon A Tax - Part 2 - Helping new landlords with their tax affairs 

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 3

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 4 

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 5 

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 6 

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 7

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 8

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 9

    I’m a new landlord. Where do I start with my tax? - Once Upon a Tax - Part 10

    As always, you are advised to seek bespoke tax advice for your personal situation.  Our tax partner, Rental Income Tax Advisors, are specialists in the landlord and property tax arena and are also the preferred tax advisors of the Residential Landlords Association.

    Contact RITA by clicking on the link at the top of this thread or call FREEPHONE number 0800 1 22 33 57.

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    Hi Vanessa, thank you for bringing this topic. Tax changes in recent days have been the main driver for us to take action this year.

    One of the strategies me and my wife decided to try as tax saving option is having properties in limited company' name.

    However, there are so many unexplored areas here and I wanted to ask you if you could assist with savvy advice with this regard.

    What we are trying to do is now is not only mitigate the risk of having BTL properties in personal names and falling under 'portfolio landlord' category, plus being affected by S24, but also benefit from commercial type of property tax reliefs.

    For instance, buying commercial office block and converting it into flats and run as rental business under limited company name.

    Our main dilemma from tax perspective is whether it is better to use #LTD or #LLP when buying commercial block.

    I heard that there are massive capital allowances on purchase and refurb costs, which could be transferred to partners in LLP and offset against any personal tax liabilities, whereas within LTD, they will have to stay with the company and there is little benefit to the owners who'd still pay tax on dividends etc. if using profits as personal income. I wonder if you are familiar with this area and if you could expand on this?

    Thanks in advance, Alex

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    Sorry Alex. It would be inappropriate of me to respond as I am not a qualified tax advisor.  

    ​I recommend you seek qualified advice and our tax partner Rental Income Tax Advisors would be more than happy to assist.  Call RITA on 0800 1 22 33 57.

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    Thank you Vanessa and yes, you are right. I will call the number you provided and ask professional accountants advise. Kind regards,  Alex

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