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Landlords…are you paying the wrong amount of tax? 
With 350,000 people taking out mortgages worth a total of £38bn last year. However, it is estimated that over 700,000 amateur landlords could be paying the wrong amount of tax.
With the Government under pressure to pull in as much tax as possible and property investors a potentially lucrative source of income, HM Revenue and Customs are determined to get their slice of the profits from rising property prices and rents.
Tax factsRent is subject to income tax, but expenses can be deducted. Interest that you pay on your mortgage can also be set off against your tax bill. If you rent out a room in your home, the taxman will allow you to earn up to £4,250 (2007/08) of rental income a year tax-free, but you must still declare it. On the sale of your property, the first £9,200 (2007/08) of profit per person is free of capital gains tax (CGT). Buy-to-lets benefit from non-business assets taper relief, which could reduce your bill above a £9,200 threshold. If your property is classed as a furnished holiday let, you can qualify for the more generous business-asset taper relief. If you live in the property prior to selling, you could claim it as your principal private residence (PPR) and benefit from three years of growth free from CGT. HM Revenue & Customs does not specify how long you need to have lived there, but they might ask for proof. You may also qualify for lettings relief of up to £40,000. If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |