Landlord Archives - CruseBurke

News,May 2018

What is the Mortgage Interest Restriction in the UK?

George27/10/2023Landlord

Are you a landlord wondering how the Mortgage Interest Restriction (MIR) affects your taxes? Read this blog till the end. MIR is a policy that was introduced by the UK government in 2017. It was gradually applied over the next 4 years to give the landlords time to adjust to the changes. It affects your taxes and income; therefore, you need to know about it. In this blog, we will cover a range of questions to give you a complete understanding of the topic. Firstly, we will look at what Mortgage Interest Restriction is and why the government imposed it. Then, we will see who is affected by this change, and if you are, how can you calculate your new tax? Let’s begin! If you are looking for regular tax updates as a landlord, visit CruseBurke! What is Mortgage Interest Restriction (MIR)? Mortgage Interest Restriction restricts the tax relief for financing costs on residential properties to the basic rate of income tax. It changed how much tax relief will be provided to you for various finance costs, which include: Mortgage Interest Interest on loans taken for furnishing Charges paid when taking out a loan or a mortgage This is what the MIR policy entails, but what was the reason for imposing it? Why Did the Government Impose Mortgage Interest Restrictions? Prior to the fiscal year 2016–17, you could claim almost all of your mortgage interest against your rental income. This meant that there were some landlords who were at an advantage with a higher rental income. To make the system fairer, the government introduced the Mortgage Interest Restriction policy. They reduced your tax relief if you had a high income and were paying the income tax at a higher rate. The tax relief was gradually reduced over a period of four years. According to HMRC, the deductions from property income will be restricted to: 75% for 2017-18 50% for 2018-19 25% for 2019–20, 0% for 2020-21 and beyond Therefore, the individuals will only be able to claim a basic rate tax deduction of 20 percent. This reduction is from their Income Tax Liability on the portion of finance costs that are not deducted while calculating the profit. Implications of Mortgage Interest Restriction on Different Sectors: The MIR impacts a lot of people in the economy, and therefore the economy itself. Following are some of the major implications of this policy: 1. Impact on the Economy The government expects that MIR could reduce the overall demand for housing, but only marginally. However, there is not a significant impact on the prices of houses or rents. This is because only a small portion of people are affected by the policy. 2. Impact on Landlords The government of the UK expects that only 20 percent of landlords will be affected by the introduction of MIR. The individuals who were getting a higher rate of tax relief will have to bear more costs to make the market fairer. 3. Impact on Equality The policy is targeted at promoting equality. Those with higher rental incomes will have to pay more. However, if you are in the protected characteristic group, you will not be affected. Now that you know why the government imposed the restriction, let’s see if you are affected by it. Are You Affected by MIR? The Mortgage Interest restriction only affects those who are paying a higher tax rate of 40 percent on their income. Previously, you could reclaim 40 percent of your mortgage interest; now, that rate has been reduced to 20 percent. However, if you were a basic-rate taxpayer, you were already getting only 20 percent tax relief, and therefore, nothing changed for you. How Can We Help? If you are a landlord who has multiple properties and you are paying a higher income tax, you need help. Therefore, we at CruseBurke provide you with the best accounting services in London. That’s not all; we ensure that you get the benefits that the government allows and plan your taxes ahead of time. Click here to get an instant quote from our team at CruseBurke! A Quick Summary! Mortgage Interest Restriction is a policy that reduces the tax relief that you can claim on finance costs. This also includes the fees paid on getting loans and mortgages as well as loans taken out for furnishing. The policy makes the market a bit fairer by disincentivising landlords with higher incomes. If you were getting 40 percent tax relief on mortgage interests, now you will only be eligible for 20 percent. Therefore, it is recommended that high-rate tax payers partner with a reliable accounting firm to avoid regulatory fines. We at CruseBurke provide you with the best tax advisory and accounting services in the UK. Click here, and we will call you right back!

Cash Basis for Landlords – When Does it Apply?

Mia Hamilton01/09/2022Accountants , Landlord , Tax Issues

In the process to be prepared for the tax returns and submissions, there is a need to gather information from the customers as well. In the case of unincorporated businesses, this information will help to know which was the first year for the application of a new cash basis for the landlords. If you aim to calculate accurate rental income and profits, you should be well aware of the updated implications and rules of the cash basis as a landlord. If you are still confused as a landlord about the updated rules of the cash basis for landlords, we have got you covered here. We will learn about the basics of cash basis and at what time it applies to you, how cash basis works for you, and what are the chances of losses in the case of unincorporated landlords. Reach out to one of our professionals to know the best way to choose a cash basis for landlords in the property business. We will love to offer instant help! Cash Basis for Landlords – When Does it Apply? Cash basis for landlords applies to businesses that are unincorporated letting businesses and their gross rent has to be lower than a certain limit. The following features are important to understand and consider in such a case. In the case of a partnership when the amount of gross rental income is lower than a certain limit and all the partners are working as an individual, you are allowed to use it. Unmarried joint owners should review their positions in a business to get the benefits on a cash basis. If a certain set of rules is not followed religiously, you will have to face the consequences. The same account must be used if you are in joint ownership and married to each other as well. No matter whether the business is for commercial properties or residential properties, the rules will remain the same for both the letting businesses. How Does a Cash Basis Work? The cash basis is mostly operational for small trades. There is a detailed guide on the use of cash basis for the landlords who are associated with the letting business as a small trade. This detailed guide is available on the website of HMRC to help people and educate them to follow the accurate ways to the process. A few key factors you should consider after adopting a cash basis include the following: It is a way to recognise the rental income. This will help to identify the exact amount that is paid to the agent. Because what the agent pay to the landlord can be inaccurate. If there is a movement between the cash basis accounting and accruals, Change of Accounting Policy (‘COAP’) Rules will be applicable. If you want to apply for a loan, the interest will be a little different than regular if you are associated with a residential property business. Unincorporated Landlord – What are the Losses? According to the updated information on a cash basis for landlords, the losses of properties can not be carried forward automatically. This will require a claim which will help to display the information about property income allowance. The Bottom Line Now that you have gathered a fair amount of information about the cash basis for landlords, we can say that a cash basis can turn out to be beneficial for the landlord only when the right amount of information is gathered and awareness of taking the right action is there. Otherwise, the consequences will no longer be proved beneficial and in the favour of your property business. You can always seek professional help if you aim to make an accurate process and want to avoid the mistakes that can make you suffer in the future. We hope these few minutes of reading will be helpful to make the right business choice. Get in touch with our young, clever and tech-driven professionals if you want to learn more about cash basis for landlords. Disclaimer: The information about the cash basis for landlords provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

HMRC Receives Airbnb Letting Data – A Basic Guide!

Mia Hamilton29/08/2022Accountants for Contractors , Business , Landlord

It is imperative for the landlords and other individuals who are associated with the business of property to realise that it is nearly impossible to keep any letting detail hidden from HMRC. Airbnb will be a source of information for HMRC for any such activity happening in the market so it is better that you disclose all your property lettings and income to HMRC before they find it out and charge you a fine for filing wrong tax returns. If you are doing any such thing, you better disclose it as early as now and include all the details of your prior years as well. HMRC Airbnb tax UK accounts are in an agreement that says Airbnb will be a source of all the hosts in the UK which means they will provide all the letting property information to HMRC. If you are associated with the letting properties and want to learn more, we have got you covered here. In this guide, we have gathered all the basic information about HMRC Airbnb tax guidance, how to declare it to HMRC and what exactly is there to be declared. Reach out to our smart team of professionals to get your HMRC Airbnb tax queries answered quickly. We will help to let you decide about tax relief with a clear mind. HMRC Airbnb Tax – Targeted Enquiries In association with HMRC Airbnb tax, Airbnb will allow HMRC to have access to the information and launch opening enquiries which aim to enquire about the tax affairs of property dealers. The enquiry will be launched especially for the individuals who hide their information and accurate earnings from HMRC and have not been found to declare their income in the previous years. 31st January is normally the deadline for opening such an enquiry for the prior years, this will ensure whether the tax was filed on time or not. HMRC can go back in years to check your previous records whether they are accurate and clear or not. In some cases, Airbnb allows going back up to 20 years of records to have a clear enquiry if a letting business is under investigation by HMRC. This is why HMRC claims to sort out any tax payment issues of landlords in the year 2021-22. This means that HMRC will like to go back in years to have a detailed observation of your tax payments. Airbnb Guidance This quick way that HMRC has launched to enquire about the old and new tax payments has put severe pressure on online platforms and the gig economy. The tax authorities are also increasing the level of pressure on these platforms to ensure the accuracy of the process. This will bring surety around the world that all the customers are paying tax well in time. To help people and spread awareness among them Airbnb has also provided PwC with written notes of information in this regard on their website. This will help to educate people. If you aim to educate yourself on this topic as a landlord, make sure you reach out to the updated information. It is important to know the tax consideration on the property to keep yourself away from any kind of fine issuance from HMRC. Moreover, this piece of information shared on the website of Airbnb does not cover the information about how to declare your income for precious years or what exactly is required to do when you are under an enquiry. What to Declare? According to the Airbnb report insight, typically the individual who is working as a UK host is making quite a good amount within the period of a year. In case of a landlord who aims to let only some part or portion of their main residence is not liable to make any such declaration. However, the rules are quite different in the case of the landlords who are building and letting commercial and resident properties for a source of income. If you fail to declare, be ready to face the struggle of penalties and fines issued by HMRC. Because they will know it anyway with or working your declaration. If you are building a second home or a third home to let and that is adding to your income, you are now obliged to create and report and bring this into the knowledge of HMRC. Declaration – How to Do it? If an individual who is in the role of a landlord has not made a declaration about her excessive income to HMRC and it is not even covered with rent-a-room relief, there should be a requirement for swift action to correct this process. The same quick actions are required for the individuals who have filed the tax returns well in time but are still stuck with the amendment dates, such amendment delays should be fixed as a priority. Moreover, you should be aware that Airbnb’s service only allows disclosing the income that they are getting from the letting property business in the UK and not the other sources of income. The Bottom Line Now that you have gathered a fair amount of information about the HMRC Airbnb tax, we can say that it is easy for HMRC to receive the letting data of current and previous years from Airbnb. So it is advisable to declare the information and excessive income sources yourself before you go under an investigation. You might require to seek professional help in this regard if you have a record of not informing HMRC about your letting data in the previous years to get the records right. We hope these few minutes of reading have helped you to develop a better understanding. Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly. Get in touch now and we will come up with fine solutions. Disclaimer: The information about HMRC Airbnb tax provided in this blog includes text …

Learn to Reclaim VAT on A New Build Project

Mia Hamilton09/05/2022Finance , Landlord , VAT

It has been observed that self-builders are often confused about reclaiming VAT on a newly built project. This tends to overlook the right that they can actually reclaim VAT on a new build. All they need to know before the process is navigated is what kind of projects are eligible. Self-builders are often found occupied with bringing your homebuilding visions to life, planning, and decision making that they tend to forget to reclaim VAT. The housebuilder’s scheme by HMRC is all they need to learn before they start the process. This is important if you intend to be successful with a self-build project. In case your project meets the eligibility criteria and you have all the required documents for claim submission, it is possible to claim 20% of the total budget. In this article, we will learn everything you need to know about reclaiming VAT. Reclaim VAT on A New Build – The Rules There are a few conditions and you are able to reclaim VAT under DIY Housebuiklder’s Scheme by HMRC. The conditions are: If you are planning to convert an old building into a new dwelling. If you plan to build a new house from scratch. A dwelling back to life that was not in use for more than a decade. A new dwelling in its own right has to be created to meet the eligibility standards. Refurbishments and extensions do not come under new dwelling projects and so they are not eligible for reclaiming VAT. For What Projects Can I Reclaim VAT? Normally self-builders are so occupied that they tend to overlook the rates area. For security, it is important to know the rates of VAT so that you can cross-check the rates inaccuracy factor. The cost that is linked with your project must be clearly understood by you as well. In case of any mistake, there is no chance that you will get a refund from HMRC. Incorrectly charged VAT will be your deal to handle. There are certain types of projects that are eligible for reclaiming VAT under the Housebuilders’ Scheme. This include the following: A newly constructed building to use for business purposes. A newly built or conversion of a dwelling that is used for your family’s holiday home. Renovation of a dwelling that is not in use for 10 or more years. Shrubs, turf, fencing, paving, or any other landscaping for outside work. Conversion of an old building that is non-residency. Church, hospital, and barn come under such examples. Construction of a building that is planned to build from the scratch. It is called a new dwelling. This could come from your personal use, family use, or holiday purposes. The relatives can also use this dwelling for holiday stays. The use of garages and their construction as a new dwelling. Stuck with your accounts and looking for a helping hand? How about you get our guys on a quick call. We love talking about taxes, payroll management, and any opportunities that help you expand your prospects. Call us on 02086868876 or email us today. Final Thoughts Finally, we can sum up the discussion as you have developed a better understanding of Reclaim VAT on A New Build. Most of the contractors get into the wrong process as they do not have enough experience and the right information to deal with new dwellings. People are of the view that they will get the VAT in the end anyway. Leaving this process to the contractor is not a good idea. In case you are still unsure about any of the VAT aspects, it is recommended that you seek professional help. We hope this piece of information helped you to gather accurate knowledge. Disclaimer: The information about Reclaim VAT on A New Build provided in this article is general in nature and does not intend to disregard any professional advice.

What is Property Income Allowance?

George05/01/2022Landlord , Property , Tax Issues

The income you earn from land or property, along with the rental income gained from renting a part of a flat or house (like a single room) is known as property income. It also includes income generated from caravans or houseboats. Similar to other incomes, it is also taxed in the UK, unless the property qualifies for reliefs or allowances. The amount of tax you need to pay on this income will be subject to your income tax band. In this blog, you’ll learn the what are tax rates for property income, what is property income allowance, when you can’t use this allowance and what records you may need to make a claim? Let’s explore! We save your time, money, and stress by handling all your finances and business problems in no time! Call us on 020 8686 8876 or email us today. What Tax Do I Need to Pay on my Property Income? The income tax band determines the rate of tax you need to pay. The rates of property income are the same as those of your personal. However, you may fall under the higher rate band if your property income and other income are added together. Here is the income tax you need to pay as per your income tax band: What is Property Income Allowance? It is a standard allowance or tax exemption on which no property tax is payable. Currently, in 2021-22, you get a tax free allowance of £1,000 a year (from 6 April 2017 onward). If your income is below this allowance, you don’t need to inform HMRC or declare any tax return. However, sometimes you need to complete a tax return even if your income is below £1,000. But, if it’s higher you need to declare your property income and complete a tax return. And you may need to file a tax return for other income. You must inform HMRC if: your property income is more than the property allowance from £1,000 up to £2,500 the property income is more than £2,500, you need to register for self-assessment Want to register for Self-Assessment? Allow us to do the hassle on your behalf. Save your time by filling out this form and let us handle everything! In case, your annual gross property income from one or more sources is over £1,000 you can still use these allowances, instead of subtracting any expenses or allowances. With this allowance, you can subtract £1,000 from your income as partial relief which should not be over your income. If you find that your expenses are over your income, you need to consider availing of expenses instead of the allowance. And, if you own property jointly, you’re each owner is eligible for the allowance as per the share of the rental income. When You Can’t Use this Allowance? You are not eligible to use the property allowance if you are making income from: employment (your employer/employer of your spouse/civil partner) a partnership where you or someone associated with you are partners a company owned or controlled by you or someone associated with you You are also not eligible to use property allowance if you: deduct expenses from income by renting a room in your own home, rather than availing Rent a Room Scheme claim the tax reducer for finance costs (such as mortgage interest for residential property) Records to Keep for Property Allowance You need to keep records of your income to claim for this allowance. Records may include: a spreadsheet of your income receipts copies of your invoices (both paper or electronic) bank statements emails indicating income earned bank deposit pay-in records statements from the company who make payment to you a diary/appointments book showing your income from the customers When Do You Need to Contact HMRC? You need to get in touch with the Income-tax helpline if: you don’t know whether you are eligible for this allowance or not you’re not registered for self-assessment and have paid tax via PAYE on some of your property income (you may be due a refund) Quick Sum Up So, that’s all about the property income allowance that is £1,000 for the year 2021-22. The tax you will pay on your property income would be the same as your personal income. However, you may fall within the higher rate tax band when your property and other income is combined. You don’t need to file a return if your property income falls below the property allowance. And make sure to keep records to provide HMRC with proof of your property income. Our property accountants are reliable and transparent. If you need any help with accounting, tax payroll, and other finance-related issues. We will solve your tax issues in no time and at an affordable price! So, contact us now! Disclaimer: The information is taken from the HMRC and is intended to provide general information.

Everything that you Need to know about Section 24 as a Landlord!

George07/12/2021Landlord , Property , Taxation

There are multiple cases in which we find the landlords confused about section 24. This is also known as the tenant tax. This basic guide will help you understand section 24 in a better way. Section 24 was introduced in April 2017 by the Government. If we explain in simple words, the right of deducting the mortgage and agreement fees is reduced due to section 24 which was happening before in the dealing of rental income. Because of this change in tenant tax, landlords tend to face higher taxes and pay more taxes than ever. However, before we delve into further discussion, we need to have a look at the points of discussion in this article: Reason for Introducing Section 24 Section 24 – How does it Work? How are Landlords Affected The Bottom Line Are you looking for a helping hand to solve the accounts that you are stuck with? How about you get our guys on a quick call. We love talking about taxes, payroll management and any opportunities that help you expand your prospects. Call us on 020 8686 8876 or email us today. Reason for Introducing Section 24: The rapid growth of the private rental sector is one of the major reasons why section 24 was introduced. There are certain reasons involved and some of them are discussed below as well: To slow down the pace and the moving tendency was a major purpose. Due to the foreseeable property bubble danger in 2015, the safer ways were taken because if the property bubble burst out this could cause serious damage to the economy of the UK. Ensure to remove the less professional landlords from the field by making hard rules to earn profit by letting the property. To boost the tenants’ stability in the market. Making it easy for first-time buyers to gain confidence in order to foothold for the first time in the ladder of property letting. More options of properties will be in the market for making good purchase options. Moreover, several professionals do not really agree with the purpose and rules of section 24 that go against the landlords and lower their pace of profits in the market. There is a view that this is making the landlords hike their rents in order to gain more and more profits to stay in the market and make their rental income stable as well. For those landlords who are still willing to be in the market, they are bound to try new ways and models to continue being part of the letting property business. Are you a landlord who is seeking professional help to know more? Give it a try and talk to one of our professionals today. Section 24 – How Does it Work? When it comes to the rules and functioning of section 24, the landlords’ rights are put to limit and they can’t offset finance costs at the time tax liability is being calculated. This makes the landlord pay more tax than before. This also means that the landlords who are in the higher tax bracket will face the loss of tax relief. This can further push them to the further tax bands as well. The increase in gross income means that it will affect student loan repayment, child benefits and tax credits etc. How are Landlords Affected: Landlords involved in finance costs are super affected by the implementation of the rules that are under section 24. This can include the following types of landlords as well: Accidental landlords Landlords who are working as an individual in the property business. The Landlords who are non-UK Residentials but have to let properties here are affected as well. The Bottom Line: Now that you have developed a better understanding of section 24 and how does it work, we can sum up the discussion by saying that there are serious concerns that prove how individuals in the letting property business can be affected by the rules of section 24 and this is further acknowledged by the professionals. However, if you intend to continue in the letting property, others are a chance to gain profits by trying multiple structures. We hope this article helped to provide fair information to develop a better understanding. Our accountants at CruseBurke are qualified and cost-effective! We save your time, money, and stress by handling all your finances and business problems in no time! So, allow us to do this at an affordable package! Disclaimer: This article intends to provide general information based on section 24 and relevant details.

What Is HMO? A Basic Guide for Beginners

George04/10/2021Finance , Landlord , Property

The landlords can have more occupants and earn more rental revenue by letting an HMO (House in Multiple Occupations). However, there are many rules and responsibilities like minimising size requirements, overcrowding, and licensing to HMO landlords. To know more about HMOs’ responsibilities, read this blog till the end. Talk to one of our chartered accountants in Croydon about the online accountancy services we provide. We are just a click away! If you want our service of managing HMO and its tenants, then feel free to contact us! What is HMO (House in Multiple Occupations)? It is a property that has three or more people who do not form a single household and typically share one or more bathroom, toilet, or kitchen facilities. According to the government, the households include singles, married or civil partners (couples), and carers & foster parents. For instance, three people who do not relate to each other in three rooms will make up three households, whereas a property with two couples (married or civil partners) will form two households. HMO can normally take the following forms: A guardian occupied property Shared houses Guesthouses Hostels Residential care homes Certain bed and breakfast establishments Bedsit accommodation Houses let to lodgers The Responsibilities for Letting an HMO As a landlord, you are required to fulfill your legal liabilities even if you let an HMO. These legal responsibilities include meeting energy efficiency rules and protecting deposits. However, the following are some additional responsibilities of the landlords of HMOs such as: Carrying out a gas safety check annually Ensuring the property is not overcrowded Maintaining as well as repairing facilities and communal areas Providing washing and cooking facilities and enough waste bins for many tenants in the property At least once every five years, checking the electrical installations Ensuring the fire risk assessment is conducted properly Installing heat detectors in kitchens and smoke alarms; hence, proper fire safety equipment should be installed. Our accountants at CruseBurke are qualified and cost-effective! We save your time, money, and stress by handling all your finances and business problems in no time! So, allow us to do this at an affordable package! Do You Require a License for an HMO? Every license will identify the total number of individuals for the occupation of the property. Moreover, it will also identify the number of years it will be valid. For an HMO, you need a license when in the property there are: Two or more separate households living Five or more tenants living Through your local council, you should apply for a license. The terms of the license will be set by the individual councils. You can ask your letting agent to apply for a license, or you can apply yourself. When applying for a license, a landlord has to inform the following different parties, and the details of these parties must be pass on to the council. The occupants who have more than three years left on the current tenancy The lender in case you have a buy-to-let mortgage The freeholder of the property (if any) Any other owners of the property Conclusion We hope now you have understood what is HMO and what are the responsibilities of an HMO landlord. Finally, we will conclude our blog by saying that managing all your properties by yourself is complex. So, if you want to grow your property portfolio, we recommend you take help from a professional letting agent to manage your house of multiple occupants (HMO). Are you looking for a professional letting agent? Then, look no other than CruseBurke. We are qualified, cost-effective accountants that will properly manage your HMO and its tenants at an affordable package! So, contact us right away! Disclaimer: This blog contains general information on what is HMO.

Property Tax UK: Brief Guide to Buying Residential Property in the UK

George11/08/2021Landlord , Personal Tax , Tax Issues , VAT

Taxes are always unexciting. However, if you want to buy or sell a property in the UK, you need to know the ins and outs of property taxes in the UK. So let’s delve deep into it. Currently, the UK government is focusing more on imposing taxes on residential property. In this instance, certain changes have been made that have added more complexity to the property tax system. In addition, the UK property market has also attracted a large number of foreign buyers to invest in residential properties. So, if you are pondering to buy a property in the UK, you need to take expert advice from our tax accountant before making a final decision. In this blog, we’ll have a look at some of the main property taxes in the UK. Let’s kick off with Stamp Duty Land Tax (SDLT)! Want to buy or sell a UK property, get bespoke tax advice beforehand from our experts to be on the safe side. Contact us right away! Stamp Duty Land Tax (SDLT) Whenever you buy a residential property in the UK, you need to pay SDLT. The rate of tax depends on the worth and nature of the property. There are various tax rates depending on the different tax bands of the value of the property. Here is the table to show the SDLT rates from 1st July to 30th September 2021 as per your property value: However, these rates vary onward from 1st October 2021 In case of buying your first home from 1st July 2021 onward. You are exempted from SDLT up to the purchase of £300,000. In addition, you need to pay 5% if it is from £300,001 to £500,000. You need to pay an additional 3% if you buy a new or additional residential property. If you’re a non-UK resident (not present in the UK for 6 months) you need to pay a 2% surcharge on purchasing a residential property in England/ Northern Ireland. There are many reliefs and exemptions available as per your circumstances. Get in touch with our accountants to mitigate SDLT! Inheritance Tax (IHT) When it comes to property tax in the UK, you can’t overlook inheritance tax. The beneficiaries of the deceased person need to pay 40% of the IHT if the value of the estate is above the nil rate band £325,000. There are many ways to mitigate IHT by transferring the properties to direct heirs like a spouse or civil partner. In addition, you can also provide gifts to your children, donate assets to charities and put the assets into a trust to reduce or avoid IHT. These techniques seem appealing, however, there are severe tax consequences. Therefore, taking advice on inheritance tax is beneficial to avoid paying extra taxes. Capital Gains Tax (CGT) Along with SDLT and IHT, Capital Gains Tax is a tax payable on the increased value of the property at the time of disposal or selling. If a property is not your main home (like buy to let properties, business premises, inherited property or land) and you make a gain by selling or disposing of, you need to pay 28% Capital gains Tax. Sometimes this rate may vary. It should be payable within 30 days of disposal. Although gifts are exempted from CGT, but you need to remember that gifts can have a wide range of tax consequences. So it is a better practice to take expert advice before making a gift. Worried about the Capital Gains Tax and ATED, let our accountant handle it! Annual Tax on Enveloped Dwellings (ATED) ATED is paid mainly by companies owning a residential property above £500,000. This amount is charged as per different bands based on the property’s value. Here is the table that shows the annual charges of the property value from 1st April to 21st March 2022: Property value Annual charge £500,000 to £1 million £3,700 £1 million to £2 million £7,500 £2 million to £5 million £25,300 £5 million to £10 million £59,100 £10 million up to £20 million £118,600 Over £20 million £237,400 These rates increase on annual basis as per the inflation. You can claim reliefs on these in an ATED return. Income Tax If you’re buying a residential property for the purposes of letting, you need to pay income tax on the rent received by the tenant. The rate of income tax starts from 0% to 45% as per the amount of rental yield. The deadline to file a UK tax return is at the end of the tax year (6 April – 5 April) landlords (non-residential) need to submit a UK tax return to show their rental yield, and pay any income tax (by the following 31 January). Succession Planning If a deceased person has not left a will before dying, the government will distribute the estate under UK intestacy law. This law may not be favourable for you when it comes to taxes. Therefore, it is advisable to prepare a will while purchasing a property in the UK. By doing this, it will provide certainty for passing wealth to the person who’s mentioned in the will and it will ensure the tax position of your estate at the time of death. Quick Sum Up Hopefully, this blog has helped you to know the basic details of property tax in the UK. So while buying, selling, transferring or inheriting property in the UK, you need to consider the property taxes like SDLT, CGT, IHT, ATED and income tax. Bear in mind that these taxes vary based on various factors and keep on changing from time to time. Furthermore, the rates are not the same for all. These are different for residential and commercial landlords and for the native and non-natives. In addition, there are many allowances and exemptions available to avoid or mitigate the property taxes of the UK. So taking advice from a tax expert is recommended for detailed tax and …

A Guide to Landlord Insurance – Types, Cost

George27/07/2021Insurance , Landlord

Find out what is landlord insurance, what are its types, what type of insurance do you need and how much does it cost. In this post, we’re going to cover it all. Let’s dive into it! What is Landlord Insurance? Landlord insurance is a category of home insurance that is aimed to cover the loss or damage of rental properties. It also covers the additional risks that occur while letting the property to tenants. You should remember that different policies will have different levels and types of cover. Typically, it covers things like: Property damage Third-party claims against you if someone is injured or their property is damaged Loss of rent Contents Want someone to manage your finances at an affordable rate? Contact us right away! Types of Landlord Insurance Typically, this insurance policy covers at least building insurance and property owners’ liability insurance. Additionally, you may also get the choice to add other landlord insurance cover to your policy like accidental damage, landlords’ contents insurance and tenant default cover. Remember that you might not need this insurance on legal grounds, however, your mortgage provider may ask you to have an adequate building insurance policy. Moreover, if you are having a leasehold policy, then your lease might have some insurance requirements too. Here are some of its major types: Landlords’ Building Insurance If you are looking for insurance to cover the cost of rebuilding or repairing your rental property against damage caused by flood, fire or vandalism, you need landlords’ building insurance. If you’re a flat owner where a freeholder is responsible for buying the building insurance, you can opt to get cover for fixtures and fittings. Landlords’ Contents Insurance Along with the building, if you want to cover your furniture, appliance and other items, you can add landlords’ content insurance to your policy. You need to remember that this insurance only covers your material possessions. It covers the amount of repair or replacement caused due to: Theft Damage caused by fire or flood Accidental damage ( if you add it to your policy) Property Owners’ Liability Insurance This insurance is often overlooked by many new landlords. It is designed to protect you against the legal liabilities in relation to the 3rd party injury or damage blamed on your property. As it is the responsibility of the landlord to maintain the property in a proper way. For instance, if someone slipped on your house floor and suffered a serious injury, the property owners’ liability insurance will cover its compensation and legal cost. Overcome your financial worries with CruseBurke! Accidental Damage Insurance If there is an accident, this insurance will cover the cost of repair or replacement of the contents like a hole in the wall because due to a wrong DIY. If you buy a landlords’ building insurance, then you can add this insurance for the protection of your building against accidents. On the other hand, if you buy landlords’ content insurance, you can enhance it with accidental damage cover for contents. Legal Expense Insurance This insurance covers the cost of legal actions that you need to take for the protection of your rental property like getting unpaid rent or evicting your tenants. Tenant Default Cover If your tenants do not pay their rent for two consecutive months or more, you can protect your rental income with the tenant default insurance. It can cover your rental loss of up to £2,500 for six to eight months. What Type of Insurance Do I Need? There are multiple types of insurance available, so it might be difficult to choose the insurance policy that suits your circumstances. Few things that you need to bear in mind while purchasing landlord insurance are the following: Is your rental property furnished or unfurnished? You need to take contents policy along with the building cover if your rental property is furnished. If it is not furnished, you need to consider things like expensive furniture or garden items that are difficult to be replaced. Then you need to decide your policy accordingly. Do you have a portfolio of properties? If you own a large number of properties, portfolio insurance is going to be a cost-effective solution for you. Do you depend on your rental income? If you are financially dependent on your rental income and have many commitments to fulfil, then considering a rent protection policy is worthwhile. These are some of the basic considerations while choosing this insurance package. However, it is advisable to talk to an insurance expert to get the most suitable policy as per your needs. Save your taxes with our tailored accounting services! Contact now! How Much Does it Cost? Typically, this insurance is a bit costly than standard home insurance as there are more risks involved. However, the exact price of the insurance may be impacted by various factors like: Location: There are some places where there is a greater risk of damage, floods, crimes etc. So the prices of insurance for those places might be higher than others. Property Size: If you own a large property, you have to get a higher cover for it. Consequently, you have to pay a large premium for it. Tenants: There are some categories of tenants for which you need to pay a high premium like if you have to rent out a place for student accommodation, you have to pay more. Type of Landlord Insurance: Along with it, the type of cover you want to take may affect the cost of the insurance. Quick Wrap Up Choosing landlord insurance can be complex if you’re unaware of its nitty-gritty details. If your rental property is on the mortgage, your mortgage provider might ask you to buy this insurance. You have the right to choose the type of insurance as per your circumstances. Still, if you are struggling to choose the type or level of insurance, our experts are here for …

Is There Stamp Duty On Commercial Property?

George26/07/2021Landlord , Tax Issues

Whenever you buy a residential property or land above the SDLT threshold in the UK, you need to pay stamp duty land tax (SDLT) on it. But is Stamp Duty payable on the commercial property too? The answer is yes! Let’s dive into the details. Worried about Stamp Duty Land Tax (SDLT)? Get in touch for help! What is Stamp Duty? In England and Northern Ireland, SDLT is a compulsory tax that buyers pay on most property transactions. This tax is called LBTT (Land and Building Transaction Tax) in Scotland. And in Wales, it is generally referred to as Land and Building Tax. This tax is applicable to both freehold/leasehold property and land transactions that are above the SDLT thresholds. You need to report most of the property transactions to HMRC even if you are not paying any SDLT. How SDLT is Calculated? You need to pay SDLT based on the purchase price of residential or commercial property as per your tax bands. You don’t need to pay SDLT on your commercial property up to £150,000. For example, if someone bought a commercial property for £185,000, SDLT is not payable on £150,000 but 2% of it would be payable on the remaining £35,000. The tax depends on multiple factors like the lease term, purchase price, etc. Remember to send SDLT returns to HMRC and pay the tax due within 14 days of completing the transaction. You can use the government calculator to know how much SDLT is payable. Looking for a qualified accountant, bookkeeper or tax expert? Get in touch with us right now! Stamp Duty on Commercial Property You need to pay stamp duty on commercial property and transfers. Here are the details of current SDLT tax bands and rates: For purchases up to £150,000, there is no SDLT payable The purchases from £150,001 to £250,000 attract a rate of 2% The purchases above £250,000 attract a rate of 5% If you’re renting a commercial property, the stamp duty is worked out based on different variables that include: Length of the lease term Annual Rent Premium paid for the lease Rates of SDLT on Commercial Property Leases If someone buys a leasehold property, he/she is going to pay SDLT on the lease-purchase price using the below rates. Rates of SDLT on Commercial Property Leases Net present value of rent SDLT rate £0 to £150,000 Zero From £150,001 to £5,000,000 1% Over £5,000,000 2% Stamp Duty and VAT If VAT is payable along with the purchase price, then the SDLT is worked out based on the entire sum that is payable on the property purchase. For example, if a property is purchased at £1,000,000 with a VAT of a 20% rate making a total purchase price of £1,200,000. The SDLT would be calculated at the price of £1,200,000. Consequently, it is double taxation on the buyer of the property, therefore you need to keep this thing in your mind while purchasing a commercial property. Quick Sum Up To sum up, we can say that stamp duty on commercial property depends on the price of land or property. If you want to reduce SDLT, you can remove the things included in the property transactions like furniture, machinery, etc. In addition, you need to work out the items that are eligible for a capital allowance against income tax or corporation tax. Furthermore, you can mitigate or eliminate SDLT on large transactions, with the help of a complex SDLT mitigation scheme. So, it is advisable to take advice from tax experts as HMRC may challenge any reduction done in SDLT. Want to reduce or eliminate your Stamp Duty Land Tax (SDLT)? CruseBurke has a team of tax experts and accountants for your help, Contact us anytime, we’ll get back to you in the shortest time possible! For a customized package, Get an instant quote right away! Disclaimer: This blog provides general information on SDLT.