Have you ever had to navigate the pitfalls of property tax? If so, you’ll appreciate how complicated it can be. After all, the amount of tax you have to pay depends on a number of different variables. This includes your marital status, current employment and financial situation, as well as how you own, manage and let the property in question. What’s more, it can be difficult to understand how to answer certain important questions.
As experienced letting agents operating in the Hammersmith area, we understand all there is to know about buy-to-let tax.
On this blog page, we offer some advice to help you better understand property tax. However, this is only a general guide. Trust Milo Ltd recommends that you consult a property tax professional who can provide you with the best advice for your personal situation.
1. Agent fees may cost less than you realise. This is because the majority of charges and fees from managing and letting agents are tax-deductible. This reduces the net cost of what you have to pay.
2. If you are a landlord in Hammersmith with a mortgage, you may have experienced some issues with Section 24 (the restriction of relief for finance costs to the basic rate of Income Tax). Remember that you should only use the finance and interest costs element for the new calculation, instead of the capital element.
3. If you are renovating a buy-to-let property, take note of which costs count as capital, such as installing an en suite, and which are revenue, such as the cost of redecorating. You can claim capital costs when you sell the property. This reduces your capital gains tax. However, you can claim revenue costs against your rental income to reduce your income tax.
4. Our letting agents remind you that if you run a buy-to-let business from your home in Hammersmith, it may be possible to claim for part of your utility and household costs.
5. Remember the wider consequences of Section 24. An increase in your taxable rental profits may affect any student loan repayments, tax credits and child benefits. We advise you seek professional advice to try to reduce the negative impact on your income.
6. Don’t forget to calculate your mileage for any journeys you make that relate solely to your property investment in the Hammersmith area. These are generally an allowable expense. However, if you utilise managing or letting agents, you should calculate the journey start point from their address, rather than your home address.
7. We recommend that you keep all your receipts and pass them onto your accountant or bookkeeper. While you may not think that something is tax-deductible, they will know for certain if it is.
8. Don’t forget about Gift Aid. If you make any donations to charity, you can declare these on your tax return. This is especially useful if you pay a higher rate of tax, because it may keep you away from the 40% tax threshold. This is both good for you and for your chosen charity.
9. Our letting agents remind you that you may be able to claim costs from before you started letting your Hammersmith property. In accordance with pre-letting expenditure rules, this can go back up to 7 years.
10. In the ‘notes’ section of your tax return, explain any big changes between this year and the previous year. This may avoid future issues.