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Information > Finance & Legal > Tax Advisors
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Do we really have to pay tax?

Tax: n. An amount of money levied by a Government on its citizens and used to run the country/state. A strain or heavy demand.
V: Charge tax on something. Make demands on somebody or something 

Did you know -
Letting property is treated as a single business? You pay tax on any rental profit as part of your overall income.

TAX is probably everyones least favourite subject. Not at least because it reduces the amount of money in our pockets. It can be hard knowing that the money you have earned has to be shared with the Government coffers. Tax is not nice but it is the law. There is no way out of it so the best you can do is to make your tax bill as low as possible while keeping within the law. Can you do this? If you own and let out several properties, you amalgamate the figures into one for income and one for expenditure. This way you can offset losses from one against profits from another.

Some people will claim that this is not as hard to do as many people think. With the ability to complete tax returns on line and have the system work out your tax liability for you, nearly everyone could have a go. If your situation is simple, completing a tax return is simple. If your life is a little more complex, then you may need some help. After all, many people have several streams of income and whilst it is relatively easy to complete the tax mans boxes, you need to know the figures first.

Many new Investors will keep simple spreadsheets to note expenditure and income relating to their property. This is probably fine to begin with, however, as the portfolio grows, so the complexity of the accounting grows. If you decide to do it yourself, it would be very much in your favour to keep up with ever changing tax laws to ensure you are claiming all allowances and offsetting all tax deductable items. Would you have time for this? Would you be better spending your time looking for the next investment property?

The right Consultant should reduce your tax liability, and save you a great deal of stress

If you feel that the idea of tax is too taxing, you should consider using an Accountant or Tax Consultant. Using a professional will leave you free to concentrate on your business, while they provide you with a financial service that will minimise your taxes and maximise your profits.

There are many Accountants and Tax Consultants offering tax and financial advice so choosing the right one may seem like a hard task. Ultimately, you will be dependent on their skill to balance the books, reduce your tax liability to the minimum and keep the business legal. Not all Accountants or Tax Consultants are experts in all types of business. Some may offer an excellent service to a self employed plumber, however, will not necessarily know all laws surrounding a property owning business. Some Investors claim that only an Accountant who has their own investment property will provide the best service and save you the most money.

Did you know?
You can rent out part of your own home and sign up to the Governments 'Rent a Room' scheme. You are allowed a tax-free income of up to £4,250 from letting rooms in your home.

So what CAN you claim for?

  • Interest on property mortgages/loans up to the original purchase price
  • Building and contents insurance
  • Maintenance and repairs to the property
  • Ground rents and service charges
  • Letting Agents fees
  • Utility bills if paid by the Landlord
  • Other direct costs e.g. vehicle, stationary, advertising, telephone
  • Certain capital costs e.g. essential gardening equipment
  • 10% wear and tear allowance for furnished properties only

What you CANT claim for

  • Most capital costs including the property itself or furniture
  • Personal expenses if they are not wholly incurred in the running of the business
  • Losses made if the property is sold

For tax purposes furnished UK holiday lettings and oversees property income
is treated separately.

If you pay tax through PAYE, and your taxable income from property is less than £2,500, you can ask for your PAYE tax code to be adjusted to collect the tax due. Ask your Tax Office to send you form P810 to report your income each year.


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