Tax saving ideas for landlords

Maranda Vandergriff

Being a property landlord can be a stable source of income for many people across the UK, as they provide a service to renters. But earning money from being a landlord is a business like any other, and they are liable to pay tax on any form of income they generate. If you are a UK citizen and you own and rent a property somewhere across the UK, you will have to pay a category of landlord tax; this is unavoidable.

It can be easy to be confused by the rules around the taxation of landlords, and it may well be the case that, as a landlord, you are paying too much. Tax advice and management is a really important aspect of being a great landlord, as small changes can be the difference between a healthy profit and just scraping by.

Here we take a look at some important ideas for saving on tax and better tax management for landlords in the UK.

Create a limited company

The first thing to say is that if you want to manage your tax as easily as possible, one option is to form a limited company that you use as a landlord. This can really help by first being able to separate your personal life and finances from those of your landlord finances. But it also has some important tax considerations.

Being a company allows you to offset your expenses against your profit, and it also gives you the option to have someone else manage elements of the property management. It’s a solution that might not be right for everyone, so it is worth discussing it with an accountant experienced in working with landlords.

Understand and make use of tax bands

It is the case that Capital Gains Tax is not usually paid when assets are transferred between spouses. This means that you may well be able to reduce your tax liability by moving some of your assets into the name of your spouse – this could allow you to make use of a lower tax band.

If your spouse’s tax bracket is lower than yours, you may also be able to pay less tax on your rental income as well. And, as long as the property doesn’t have a mortgage and you aren’t taking financial gain from it, you won’t need to pay stamp duty.

Invest in your properties

Landlords are sometimes criticised by tenants for failing to put enough investment into the upkeep of a property. In truth, investing in the properties can be extremely useful from a tax perspective –

not only in terms of renovating and refreshing the property, but also looking into the possibility of extending it.

Of course, it is important to take into account the maximum rental yield you are going to get from a property in the area. Overspending might result in a better tax situation, but you won’t be able to make up for it in terms of the cost of the project.

Consider the possibility of short-term lets

You might be used to managing long-term lets, and this can work for many landlords. But you may not have considered the potential benefits of short-term lets.

One of the major advantages of short-term lets is that it gives you the chance to regularly evaluate the value of the property. That means you can always get a rental yield that is sensible for the area. If you are locked into a long-term contract and the local area rises in popularity, this can mean that you are missing out on income.

Speak to an experienced accountant

Every landlord has different tax needs, and possibly the most valuable thing that you can do is speak to an accountant who has specific experience dealing with landlords and helping them to manage their taxes.

If you are interested in learning more about our bookkeeping and accounting services or any aspect of business finance and payments, get in contact with the experienced team at Wellden Turnbull today.