Landlord Archives - Page 2 of 2

News,May 2018

Landlord Insurance Explained: Types, Costs, and What You Really Need

George27/07/2021Insurance , Landlord

Find out what is landlord insurance, what are its types, what type of insurance you need and how much it costs. 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 coverage. 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, appliances 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 legal liabilities in relation to third-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 slips on your house floor and suffers a serious injury, the property owners’ liability insurance will cover the compensation and legal costs. 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 due to a wrong DIY. If you buy a landlord’s 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 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. A 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 the 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 replace. 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 your help. For further queries, reach out to our accountants for help, and we’ll get back to you in the …

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.

What’s the Difference Between Leasehold vs Freehold Property?

George27/04/2021Accountants , Landlord

Curious to find out the difference between leasehold vs freehold property? This blog post will let you know how you can own the property in different ways. We’ll explore the benefits, cost, and needs of each and how these factors affect the property’s buying, selling, and maintenance costs. Let’s start with the difference. Leasehold vs Freehold – The Difference: Though there are many differences, the major ones are shown in the below graphic image. What is Freehold? As evident by the name, it is a property without the hold of any other entity except the owner. The ownership of this property is totally owned by the freeholder. The property includes the building and the land on which the property is built. As a freeholder, you need to manage both your property and land. Most of the houses are freehold, but some might be leasehold. Pros of Freehold: Here your property ownership is outright and you don’t need to consider the running out time of the lease You don’t need to deal with landlords You’re free from paying ground rent, service charges, and other charges Worried about the finances of freehold property, let our accountant handle it! To find out the difference between leasehold vs freehold, you must know about the leasehold. What is a Leasehold? In leasehold, property ownership is subject to the duration of the leasehold agreement with the landlord. You are no longer the owner after the completion of the lease period as after it, the ownership transfers to the freeholder unless it is extended. Many maisonettes, houses, and flats are owned and sold on the leasehold. You should know that on leasehold you only own the property (e.g building) for a certain period, not the land on which it is built. Need guidance on leasehold, get in touch with us!. Leasehold Buying Process: First, you need to ensure that you get the property ownership from the previous leaseholder. While taking a property on lease, you should consider the following points: Years of a lease; the duration How would you manage a budget for service charges and other costs How leasehold length affects the mortgages and the resale value of the property Leasehold Length: A below 70-year lease agreement might make it difficult to get a mortgage. Lenders require the mortgage period to be at least 25 to 30 years after the end of your mortgage. It means that the duration of the lease should be double the duration of your mortgage. For this reason, selling such property is difficult. Find out more about leasehold property here at gov.uk Quick Wrap Up: Now you can easily differentiate between leasehold vs freehold. Whatever your choice is, you should remember that both of the ownerships have their pros and cons. A leasehold might be favorable to your circumstance while a freehold might be good for another. It depends on the area, law, and individual situations. These factors need to be discussed before finalizing between the two. For this reason, CruseBurke has a team of certified accountants who have expertise in this field. You can contact us for in-depth guidance and support. Contact us anytime! Disclaimer: This blog shows the basic differences between freehold and leasehold.

How to Avoid Paying Tax on Rental Income?

George16/04/2021Landlord , Tax Issues

Many of our customers (especially landlords) often ask this question. The answer of which is quite simple, there is no way to avoid paying tax on rental income. Yet you can reduce your income tax on the amount you received as rent. To boost your net rental income there are multiple ways to save taxes. Here in this blog, we’ll talk about how to avoid paying tax on rental income. You should first know the process of calculating your rental income. As commercial premises have different tax rates and residential areas have different. In addition, you should also consider the capital gains in your property. What is Rental Income? Rental income is one of the most attractive types of income for real estate investors. Contrary to other incomes that fluctuate with time, rental income hikes with each passing day. That’s the reason, there are fewer buyers and fewer sellers of rental property. How to Avoid Capital Gains Tax on Property? Though real estate is a great option for investment, Capital Gains Tax eats away the increased amount of your asset at the time of its sale. Capital gain is the increased amount you get while selling a property or home. If the value of your property has increased from its date of purchase, you’re liable to pay capital gains tax on it. While selling you need to authorize it to the government. You may get tax exemptions on capital gains tax on the following factors: Sold property is your primary residence You do not use a part of a home for business Your property size is less than 5000 square meters Invest your entire capital gain into another asset Do indexation to decrease capital gains Use some other items for saving tax Are you a landlord struggling to reduce your Capital Gains Tax, we’d love to help, do let us know! How to Avoid Paying Tax on Rental Income? You can minimize your rental tax through the following ways: 1. Own a property Jointly: You can jointly own property to divide your rental income. Thus the tax on this income is also divided. You can benefit from the lower tax slab if your wife is a working woman. 2. Municipal Taxes: Municipal taxes reduce your rental earnings and tax respectively. 3. Standard Deductions: You can claim up to 30% as a Standard Deduction without considering its renovation and maintenance. 4. Furnished Property: Ask your tenants to pay small bills of wifi, capable, newspaper, gas, etc to reduce the amount of rent and rental liabilities. Key TakeAway: The current threshold of property allowance is £ 1,000. If you’re looking for an expert to reduce your tax liabilities, feel free to contact us. Quick Sum Up: Hopefully, you have got some information on how to avoid paying tax on rental income. This is not financial advice you should rush for, it is always advisable to avail the services of an accountant before taking any decision. The best way to reduce your capital gains tax is to offset the earning received through declaring a house in the loss. Secondly, do the tax-loss deductions to bring down the risk of taxes levied on the gained amount. By doing proper accounting for both gain and loss, a trader can reduce the capital profit they are taxed for. CruseBurke is a team of certified chartered accountants who’re willing to minimize your tax burden. So reach out anytime! Disclaimer: This blog provides a general understanding on avoiding tax on rental income.

Using the Property Rental Toolkit to Avoid Common Errors in Returns

George05/08/2019Accountants for Contractors , Landlord

HMRC property rental toolkit highlights errors commonly found in tax returns in relation to property income. The toolkit can be used to help avoid those errors, some of which are discussed briefly below. Computation For unincorporated property businesses, the default basis is the cash basis where the qualifying conditions are met and the landlord does not elect to use the accruals basis. Where the business has moved into or out of the cash basis, transitional adjustments may be needed. In some circumstances, a trade of providing services may be carried on in addition to the let of the property; and in some cases, the letting may amount to a trade. It is important the correct computational rules are used. Record Keeping Poorly-kept records may mean that things are overlooked – income may not be taken into account and allowable expenses not claimed. Property disposals may also be missed. Property Income Receipts All income that arises from an interest in land should be included as receipts of the property rental business. Receipts can include payments in kind (maybe work done on the property in lieu of rent). It should be noted that casual or one-off letting income is still treated as income from a property rental business. Profits and losses from overseas lets, from furnished lettings, and from properties let rent-free or below market rent should be dealt with separately. For other UK lets owned by the same person or persons, income and expenses are combined to work out the overall profit or loss for the property rental business. Deductions and Expenses Expenses incurred wholly and exclusively for the purposes of the property rental business can be deducted in the computation of profits. Problems may arise where an expense has both a business element and a private element (for example, a car or phone used both privately and for the business). A deduction can be claimed only for the business part where this can be identified and meets the wholly and exclusively test. The way in which relief for finance costs is being given is shifting from relief by deduction to relief as a basic rate tax reduction. Ensure that the split is correct for the tax year in question and relief given in the right way. Allowances and Reliefs There are various reliefs that may be available to those receiving rental income. Rent-a-room relief is available where a room is let furnished in the taxpayer’s own home, enabling receipts of £7,500 a year to be enjoyed free of tax. The property income allowance of £1,000 means that rental income below this level does not need to be returned to HMRC. Where income exceeds this level, the allowance can be deducted instead of actual expenses where this is beneficial. Capital allowances can be claimed in certain circumstances. They are available on certain items that belong to the landlord and which are used in the business, for example, tools, ladders, vehicles, etc. However, they are not available for domestic items in a residential property for which a replacement relief is available instead. Capital allowances are similarly not available for plant and machinery in a residential property unless it is a furnished holiday let. Losses Property rental losses must be treated correctly. They can only be carried forward and set against future property profits of the same property rental business. Checklist The checklist within the toolkit can be used to ensure that everything has been taken into account and that nothing has been overlooked. Additional Note: HMRC’s property rental toolkit (see www.gov.uk/government/publications/hmrc-property-rental-toolkit).