While the Conservatives have promised not to increase corporation tax, National Insurance, Income Tax or VAT, there is still a chance other taxes could go up. Which is a concern for the real estate industry. With over two million private landlords renting out five million properties in the UK, being aware of tax reliefs and pitfalls has never been more important.
Capital Allowances
2014 legislation means owners could be blocked from claiming Capital Allowances if they aren’t correctly handled when a building is bought or sold. So it’s essential to get to grips with Capital Allowances, either through research or a tax specialist.
Multiple Dwelling Relief
MDR is normally available to investors purchasing more than one property from the same seller or several linked properties. The relief changes the way stamp duty is calculated by averaging out the rate between the investor’s properties.
Tax relief
In 2012 HMRC abolished renewal allowance for white good replacement, costing a lot of landlords dearly. But if a property is let fully furnished the landlord can claim a 10% wear and tear allowance.
ATED
ATED stands for Annual Tax on Enveloped Dwellings and refers to buildings owned by a ‘non-natural person’, as in companies, corporate partnerships, collective investment vehicles, etc. It is payable on residential properties above a £500,000 value.
Reliefs are available to certain entities, such as developers and professional investors, but claiming involves filing a return, even if no amount is due. And not doing so can result in penalties. The safest option is ask a specialist what you should be sending to HMRC if you own any property not held in your name.
Ownership
It’s worth looking into what type of ownership is best for your property. Depending on plans and how far they stretch, it’s often better for an investor to own a property as a limited company rather than an individual. Bear in mind it’s the start of a new political term and things like capital gains and stamp duty may well change.
Property tax is not a simple area, but getting to grips with it can save a lot of money. Need property legal assistance or expert local tax advice? Contact the Johnson Legal team.