Tax Saving for the Property Investor
Legitimate ways to pay less tax on all your property dealings
A Tips & Advice book about...
In a nutshell
This book suggests 100% legal and legitimate ways to save tax on your property investments. Fully updated with 2022/23 tax year figures and the latest rules, it covers all the relevant tax breaks. Whether you're a seasoned investor or a first-time buyer, this book will ensure you're able to choose the most appropriate tax-saving strategy for your situation.
In detailWritten by property tax experts, this book considers how all the relevant taxes come together. It’s split across four sections containing a stack of ready-to-use tax-saving strategies:
- Rental income
- Maximising expenses claims
- Making full use of rental losses
- Property disposals
- Using private residence relief
- Gifting properties
- Joint ownership
- Owning properties through a limited company
- Investing in commercial property
Investing in property - both residential and commercial - still offers the potential for sizeable returns. But where there’s an opportunity to make profits, HMRC will try to grab a slice. This book provides you with a series of tax-saving strategies to keep HMRC’s take to an absolute minimum. Plus, you’ll also get handy documents and tools to support your claims for tax relief.
We've created this Tips & Advice Book especially for...
Professional and amateur property investors (residential and commercial) that want to:
- Take full advantage of the tax loopholes
- Keep HMRC's take to an absolute minimum
Tax advisors and accountants that want to:
- Help their clients choose the most appropriate property investment strategy for their situation
You'll get the following free extras with this Tips & Advice book...
An online service with ready-to-use documents
- To immediately apply our advice and solutions in practice
- That you can easily adapt to suit your own requirements
In this This & Advice book you'll read about...
Part 1 - Avoiding tax on rental income
1. Rental income - the tax basics
1.1. Income tax rates
1.2. How do I work out rental profits (or losses)?
1.2.1. Do I need to prepare a set of accounts?
1.2.2. I’ve got two UK properties, do I need to prepare two sets of accounts?
1.2.3. Can I choose the accounting date?
1.2.4. How long should I keep the records for?
1.2.5. What happens if I’ve “lost” the records?
1.2.6. When should I account for rental income? When it is due or when it is actually received?
1.2.7 What if I only have a small amount of income?
1.3. Which tax returns must I complete if I have rental income?
1.3.1. Where do I get the returns from?
1.3.2. By when do I need to submit the return?
1.3.3. When do I pay the tax?
1.3.4. Can I complete the returns myself or do I need an accountant?
1.4. Rent-a-room relief
1.4.1. Gross rent less than £7,500
1.4.2. Gross rent more than £7,500
1.4.3. Is the £7,500 per person or per property?
1.4.4. Can I have more than one tenant?
1.4.5. Do I have to live in the property?
2. Reduce your rental income by maximising expenses
2.1. What costs can I deduct from my rental income?
2.2. Interest charges from 6 April 2017
2.3. Structural repairs and maintenance costs
2.3.1. Which structural costs can I claim?
2.3.2. The exceptions
2.4. Renewing fixtures and fittings
2.4.1. Can I claim the costs of a new kitchen or bathroom?
2.5. Renewing furnishings and equipment
2.5.1. Wear and tear allowance (pre-5 April 2016 only)
2.6. Capital allowances
2.6.1. How much can I claim?
2.7. Travelling costs
2.7.1. How much can I claim?
2.7.2. Which method should I use?
2.7.3. How do I split the travelling expenses when I own the property with my spouse?
2.8. Pre-letting expenses
2.8.1. Can I claim the cost of mortgage interest incurred before I let the property for the first time?
2.8.2. Can I deduct the cost of doing up the property before it’s let for the first time?
2.9. Legal and professional costs
2.9.1. Can I claim my accountant’s fees for completing my personal tax return?
2.10. Costs of services provided, including wages
2.10.1. Can I claim the cost of paying my spouse/partner a wage for managing the property?
2.10.2. How much can I pay them?
2.11. Other expenses
3. Making the most of your rental losses
3.1. What is a rental loss?
3.1.1. What can I do with a loss on general UK property?
3.1.2. How do I claim the loss?
3.1.3. Can I offset losses from a previous UK property against income from one bought several years later?
3.1.4. Can I offset the loss against my other income
in the year?
3.1.5. Can I let a property to a relative for a nominal rent and still claim all my property-related expenses?
3.1.6. If I always make losses on my rental property, do I need to declare them to HMRC?
3.2. Furnished holiday lettings
3.2.1. Does my property qualify as a furnished holiday let?
3.2.2. What does HMRC view as “commercial letting”?
3.2.3. What can I do with a loss on furnished holiday accommodation?
Part 2 - Saving tax on property disposals
4. Capital gains - the tax basics
4.1. What is capital gains tax?
4.1.1. Do I have to pay CGT?
4.1.2. What’s the rate of CGT?
4.1.3. Can I avoid CGT by just giving the property away?
4.1.4. Are there special rules for spouses and civil partners?
4.1.5. How much is the annual CGT allowance?
4.1.6. Which tax returns do I need to complete
for capital gains?
4.1.7. When do I have to pay the tax?
4.1.8. What’s the date of sale: when we exchange contracts or when we complete?
4.1.9. How do I calculate the capital gain?
4.2. Reduce the gain by claiming all allowable costs
4.2.1. Buying costs
4.2.2. Travelling expenses
4.2.3. Enhancement costs
4.2.4. Selling costs
4.2.5. Can I deduct the mortgage early redemption penalty?
4.3. CGT-avoidance strategy - don’t sell, just re-mortgage
4.3.1. What are the short-term benefits?
4.3.2. Long-term trap
4.4. Allowable losses
4.5. CGT-avoidance strategy - offset stock market losses against the property gain
4.5.1. Can I offset stock market losses from previous years?
4.5.2. Do I actually have to sell the shares to claim the loss?
5. Avoid CGT by using private residence relief
5.1. Private residence relief (PRR)
5.1.1. What is private residence relief?
5.1.2. Is it available to me?
5.1.3. How much can I claim?
5.1.4. The “nine-month rule”
5.1.5. Which other periods of absence from the property still qualify for PRR?
5.1.6. What happens if I’ve bought a property, but can’t move in until it’s done up?
5.1.7. If I move into my property after I’ve let it out for a few years, can I still claim PRR?
5.2. Private letting relief
5.2.1. Is it available to me?
5.2.2. What’s it worth?
5.2.3. Can a husband and wife or registered civil partners each claim the relief?
5.3. CGT-avoidance strategy: live and let not buy to let
5.4. CGT-avoidance strategy: let and live
5.4.1. Is there a minimum length of time that I have to live in the property to claim PRR?
5.5. CGT-avoidance strategy: nominate/flip a residence
5.5.1. How do I make the election?
5.5.2. What happens if I don’t make an election?
5.5.3. How long does the nominated property have to qualify for PRR?
5.5.4. Can I nominate my overseas holiday home for PRR?
5.6. Selling land that is part of my main residence
5.6.1. What happens if my garden is more than half a hectare?
5.6.2. Would it be better to sell the property before I sell the land?
5.6.3. CGT-avoidance strategy: develop and move
5.7. Making use of children’s tax allowances
5.7.1. Can I receive any of the proceeds once my child has sold the property?
6. The tax implications of gifting properties
6.1. Avoiding CGT when transferring property to someone other than my spouse
6.1.1. Make use of the annual exemption and transfer
6.1.2. What about stamp duty?
6.2. How to avoid CGT on gifts of holiday homes
6.2.1. What is gift relief?
6.2.2. How do I make a claim?
6.2.3. Is there a time limit for making the claim?
6.2.4. So how will it work if I want to give a holiday home to one of my children?
6.2.5. But doesn’t this mean that my child will pay more CGT when they eventually sell the property?
6.2.6. Can I receive any of the proceeds once my child has sold the property?
6.2.7. CGT-avoidance strategy - don’t gift the holiday home, sell it at undervalue
6.2.8. Do furnished holiday homes qualify for business asset disposal relief?
6.3. Using trusts to avoid CGT
6.3.1. What is a trust?
6.3.2. What’s the difference between a discretionary trust and an interest in possession trust?
6.3.3. Does a discretionary trust have to pay tax on its income and gains?
6.3.4. How do I set up a discretionary trust?
6.3.5. How do I put the property into a discretionary trust?
6.4. Tax-avoidance strategy - using trusts to defer CGT on residential property gifts
6.4.1. Can the trust beneficiaries live in the property and claim PRR?
6.5. Inheritance tax on lifetime gifts
6.5.1. What are the basic principles of IHT?
6.5.2. Can I give a property away, but continue to live in it?
6.5.3. How does IHT interact with CGT?
6.6. IHT (and CGT) avoidance strategy: equity release
6.7. Tax-avoidance strategy: transfers to spouse
6.8. The main residence nil rate band
Part 3 - Buying strategies to avoid tax
7. Buying a property in joint names
7.1. Joint ownership with a spouse
7.1.1. Can I save income tax on my rental profits if I transfer the property to my spouse?
7.1.2. If I own a property jointly with my spouse, do we always have to split the rental profits equally?
7.1.3. Tax-avoidance strategy: Split the income but retain ownership
7.1.4. Can I save CGT if I own the property jointly with my spouse?
7.1.5. If I own a property jointly with my spouse, will the capital gains automatically be split 50:50?
7.1.6. Can I transfer half the property to my spouse before I sell it to make use of their annual exemption?
7.2. How do I transfer part of a property to my spouse?
7.2.1. What are the different types of joint ownership?
7.2.2. Which method should I use?
7.2.3. How do I change from joint tenants to tenants in common?
7.2.4. What should be included in a declaration of trust (trust deed)?
7.2.5. Should I transfer part of the mortgage debt to my spouse?
7.3. Joint ownership with someone other than my spouse
7.3.1. Can I save income tax if I transfer the property to someone other than my spouse?
7.3.2. How is the income split if I own a property with someone other than my spouse?
7.3.3. Can I save CGT if I own a property with someone other than my spouse?
7.3.4. Can I transfer half the property to someone before I sell it to make use of their annual exemption?
7.3.5. Can I own a property jointly with more than one person?
7.3.6. Does a mortgage on the property have to be in the names of all the owners?
8. Owning properties through a limited company
8.1. What is a limited company?
8.1.1. Why is it called a limited company?
8.1.2. How do I set up a limited company?
8.1.3. How much does it cost to run a limited company?
8.2. How is rental income taxed in a limited company?
8.3. How are capital gains taxed in a limited company?
8.3.1. Can companies still claim indexation relief
on their gains?
8.3.2. What is indexation relief?
8.3.3. How do I calculate indexation relief?
8.3.4. What happens if the relief is more than the gain?
8.3.5. The company purchased the property before 31 March 1982, so what indexation factor do I use?
8.4. How do I take money out of a limited company?
8.4.1. Paying myself a salary
8.4.2. Paying myself a dividend
8.4.3. When is it preferable to take a salary?
8.4.4. When is it preferable to take a dividend?
8.5. Advantages of using a limited company
8.6. Disadvantages of using a limited company
8.7. So should I buy a residential property through a limited
8.7.1. I already have a company
8.7.2. I don’t already have a company
8.7.3. The tax advantages of long-term investment
8.8. Using a property management company
8.8.1. What is a property management company?
8.8.2. How will a property management company
save me tax?
8.8.3. How much can the property management company charge?
8.8.4. Does there need to be a formal contract between me and the company?
8.8.5. Should I set up a property management company?
8.8.6. VAT and property management companies
9. Investing in commercial property
9.1. Why should I invest in commercial property?
9.2. Can I take advantage of business asset disposal relief?
9.2.1. What is business asset disposal relief?
9.2.2. Do furnished holiday lettings qualify for BADR?
9.3. Should my company’s premises be owned by me or
9.3.1. Do I need a formal letting agreement between me and my company?
9.3.2. Tax-avoidance strategy: use a licence instead of
9.3.3. How much rent should I charge?
9.3.4. Do I have to charge VAT on the rent?
9.3.5. So, should I register for VAT?
9.3.6. Tax-avoidance strategy: register for VAT
9.4. Tax-avoidance strategy: use a pension scheme to buy
a commercial property
9.4.1. How do I set up a pension scheme?
9.4.2. How much can a SIPP borrow to buy a commercial property?
9.4.3. What other benefits does a SIPP offer?
9.4.4. What are the disadvantages of a SIPP?
9.4.5. Would I benefit from setting up a SIPP?
9.5. Capital allowances
9.5.1. What are the capital allowance rates?
9.5.2. How to claim 100% of the cost of equipment purchases over the annual investment allowance against rental income
9.5.3. Can I claim capital allowances on the fixtures present when I buy the property?
9.5.4. How do I come to an agreement with the seller?
10. Other tax considerations when buying an investment property
10.1. Should I take out an interest-only or a repayment mortgage?
10.2. Stamp duty land tax (SDLT)
10.2.1. Do I still have to pay SDLT if I’m not resident in the UK?
10.2.2. What are the rates of SDLT?
10.2.3. SDLT and transfers to connected persons
10.2.4. SDLT-avoidance strategy: pay separately for fixtures and fittings
10.2.5. How do I pay the SDLT?
10.2.6. How to take advantage of “averaging relief”
10.2.7. So how else can I avoid paying SDLT?
10.3. SDLT on leases
10.3.1. How is SDLT calculated on the grant of a lease?
10.3.2. How do I calculate the NPV over the term of the lease?
10.3.3. How can I avoid paying SDLT on leases?
Part 4 - Overseas property tax issues
11. Moving overseas
11.1. Can I avoid tax by moving overseas?
11.1.1. How can I become non-resident?
11.1.2. How many days can I spend in the UK and still be automatically classed as non-resident?
11.1.3. Do I have to tell HMRC I’m leaving the UK?
11.1.4. What is the “five-year rule”?
11.1.5. What happens if I sell my UK commercial property and then return to the UK within five years?
11.1.6. Can the five-year period be reduced?
11.1.7. Does the “five-year rule” apply to any gain made on my main home?
11.1.8. Will I have to pay CGT in my country of residence?
11.1.9. Can I be resident nowhere and avoid CGT?
11.1.10. When did non-residents have to start paying UK CGT on UK residential property sales?
11.1.11. Is all of the gain chargeable to non-resident UK CGT?
11.1.12. How, and by when, do I pay the new CGT charge?
11.1.13. But won’t I be paying CGT twice - in the UK and in my country of residence?
11.1.14. Can I avoid non-resident CGT by nominating the UK property as my principal private residence?
11.2. Can I also avoid income tax if I’m non-resident?
11.2.1. What is the “non-resident landlords scheme”?
11.2.2. Can I apply to have my rent received without deduction of tax?
11.2.3. Why might my application be unsuccessful?
11.2.4. Tax avoidance strategy: how to reduce the tax on UK rental income
11.2.5. A note on SDLT
12. Investing in overseas property
12.1. Why invest in overseas property?
12.2. How is overseas rental income taxed?
12.2.1. Do I have to pay tax on my overseas income if I’m not UK domiciled (a non-dom)?
12.2.2. Can I change domicile and avoid UK income tax by keeping the income overseas?
12.2.3. What exchange rate do I use?
12.2.4. If I’ve got UK and overseas property, can I group all the income together?
12.2.5. Which expenses can I claim against my overseas rental income?
12.2.6. What can I do with any loss I make on my overseas rental income?
12.2.7. Where on my tax return do I put the overseas rental income?
12.2.8. Will I also have to pay tax on the rental income in the country where the property is situated?
12.2.9. How do I pay the overseas tax?
12.2.10. Is the tax year the same as in the UK?
12.3. How are capital gains on overseas properties taxed?
12.3.1. Is CGT due in the UK on an overseas property?
12.3.2. How do I calculate the gain when it’s in a foreign currency?
12.3.3. Is CGT due in the overseas country?
12.4. What are the inheritance tax implications of owning overseas property?
12.4.1. Forced heirship
12.5. Should I set up a limited company to invest in overseas property?
12.5.1. Can I avoid UK income tax if I set up an offshore company?
12.5.2. Can I avoid UK CGT if I set up an offshore company?
12.6. Are there any other taxes that I need to consider?
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