Tax planning for landlords: Don’t overlook tax efficiency

Tax planning for landlords: Don’t overlook tax efficiency

With the introduction of heavier tax liabilities along with greater regulations imposed on landlords, tax planning has never been more important.

Becoming a successful buy-to-let landlord involves many factors, one of the most important of these being your tax efficiency.

Ensuring you are only paying the tax you owe will help you maximise your returns on a buy-to-let property.

When approached correctly, and with the right advice, you should be able to make an already lucrative investment work for you.

Tips for reducing your tax bill as a landlord

With the above in mind, we’ve collated some of the best (and legal) ways you can manage your tax liability as a landlord.

-        Consider setting up a limited company

This is no easy task, as it takes a significant amount of planning to do this correctly, however, setting up a limited company is a good way to reduce your tax liability.

The main benefits include being able to buy a property through the company meaning you can offset costs against profits.

It also means you can employ yourself or someone else to manage properties in your portfolio.

-        Make use of all tax bands

You could cut your tax bill by transferring your assets to your spouse. If your spouse is in a lower tax band, you could limit your liability for Capital Gains Tax as well as potentially pay less tax on your rental income.

If the property does not have a mortgage and you are not making any financial gain from transferring it to your spouse, you don’t have to pay any stamp duty.

-        Extending to reduce

By putting money into your existing properties, you could avoid substantial stamp duty charges and raise the value of the property.

Taking into account the ceiling price of the area in which your rental is situated, you can make significant gains by expanding or extending your property.

Bearing in mind that if the improvements increase the occupancy, you could be affected by upcoming changes to Houses of Multiple Occupancy (HMO) rules.

-        Claim everything you are entitled to

Many landlords could reduce their tax bills by simply claiming everything back they are entitled to.

It takes a bit of due diligence in regards to your expenses, keeping every receipt and speaking to an accountant or tax advisor is the best way to make sure you’re getting back what you are owed.

Being as tax efficient as possible takes time and the correct understanding of the different ways you can reduce your liability.