As an investor, it would be wise to understand the basic principles of tax. Increase your financial intelligence and become more knowledgeable on the issues of property invesment. It is advisable to choose an accountant of property expertise to work with. This knowledge could save you a substantial amount of money. Money that could be reinvested again and again, ultimately providing more profit for you.
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Basic Tax tips
Here are some basic steps to help you reduce your property tax bills.
1). Buy a property in the most tax-efficient manner!
Consider buying property jointly with your partner to use both your Capital Gains and Income tax allowances.
2). Choose a property investment strategy that saves you tax!
If you buy property to 'renovate and sell', then you will be taxed differently than if you only 'buy and let' property. For instance, if you buy and sell property, your gains may be taxed as Income rather then Capital Gains. This means that you need to establish how and which taxes (Income Tax and/ or Capital Gains Tax) will be applied to your property investments.
3). Offset ALL costs against income!
Offset as many costs against your rental income as possible, to genuinely reduce your tax bill! Many people are not aware of the numerous costs that can be offset against your property income. For instance maintenance, insurance policies on white goods, gas boilers and plumbing cover, which insure your property against any leaks or problems, can all be offset against rental income. Dont forget travelling expenses too. Dont throw away your receipts!
4). Plan for the future and benefit yourself and your family Longterm!
In 2020 the average house is predicted to cost £330,643. This will create an Inheritance Tax bill of £32,257.20 for the property alone, if allowances continue to stand still. It also means that the inheritor may be forced to sell the family home in order to pay the tax! Many people are using trusts and gifting options to reduce their potential liabilities to this tax. Speak to a tax planner.
5). Get a good accountant and cut his costs!
Poor tax planning and accounts management means a bigger accountancy bill! By learning about Property Tax early on in your investment career, you can not significantly reduce your tax bill. The better informed you are about tax, the better questions you can put to your accountant.
6). Re-mortgage or Sell?
Before you decide to sell, look at the tax liability and then consider re-mortgaging. It is often possible to release more net cash by refinancing than selling. Also, re-mortgaging means that you retain future increases in both capital and rental values.
Hope this helps. Find a professional property accountant for the best advice.
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