Landlords must declare all the income, expenditure and costs involved in letting property on a Self Assessment Tax Return by January 31. Failure to do so could result in the landlord being hit with a hefty fine by the taxman.
John Heron, Paragon Mortgages managing director, says: ‘Good tax planning is key and the last thing that landlords need is a tax demand that they did not anticipate. How you implement, manage and run your tax affairs could have a major impact on your property investments and their financial profitability. The January 31 deadline is just under a week away, so landlords need to make sure they are ready.’
To help landlords comply with the necessary tax laws, Paragon Mortgages has produced the ‘Buy-to-let Tax Guide’, which can be downloaded at www.paragon-mortgages.co.uk/files/taxguide.pdf or by visiting the Literature Library at the www.paragon-mortgages.co.uk website.
The comprehensive Guide helps landlords from purchase through to sale and provides valuable information on Income Tax, Annual Income Tax Returns, Limited Companies and Capital Gains Tax, in addition to top tax tips and frequently asked questions.
John Heron adds: ‘Our Buy-to-let Tax Guide will help landlords get a better grasp of tax. In broad terms, tax matters for landlords are straightforward – tax is payable on rental income after the cost of running the property and financing the purchase and development of the property. However, there are a number of tax reliefs available, such as costs incurred in the running of a portfolio, including mortgage interest and maintenance costs.’
To help landlords achieve a successful tax strategy, Paragon Mortgages offers its top tax tips:
Establish ownership from the start – will the property be owned in joint or single names? This decision can have significant tax implications
Choose the mortgage repayment type – interest-only or repayment? You cannot claim back the capital repayment part of a mortgage
Set up a separate bank account for the lettings business – this helps to keep your finances in order
Consider forming a limited company – this depends on individual circumstances, but limited companies pay corporation tax on their profits instead of income tax
Register with HMRC – you have an obligation to register with HMRC and submit annual returns to them, regardless of whether you are making a profit or loss on the property
Keep detailed records of lettings income and expenditure – this is essential when completing your annual tax return and also provides evidence if the return is questioned
Claim your expenses – landlords can claim most of the costs incurred through their lettings business, including mortgage interest, insurance costs, legal fees, letting agent fees and advertising. You can even claim for improving the energy efficiency of your property
