Buy To Let Accounting Services

Is it still wise to invest in buy-to-let property?

Buy-to-let property in the UK is still widely considered a sound investment, with good potential for capital growth plus the promise of a steady rental income. The market is starting to show signs of recovery following the coronavirus outbreak and rental prices have enjoyed continued growth, providing confidence to investors both existing and new.

It’s fair to say that rental property isn’t quite the golden goose it once was, in light of the recent slew of changes made by the government to landlord tax benefits. In April 2020 mortgage interest relief (MRI) for landlords ended, having been phased out since 2017. There are also more changes afoot to Capital Gains Tax.

Why do landlords need an accountant?

It pays to be well-informed and understand how these changes will impact you as a landlord. This is one area in which the knowledge and expertise of property accountants can be invaluable, in providing advice and seeking out tax efficiencies.

What are my financial responsibilities as a landlord?

As a landlord, you have many financial and administrative responsibilities. Having personal rental income requires you to register for self-assessment and to complete annual tax returns. Similarly, if your property is owned by a limited company, you are required to submit annual accounts and tax returns. 

Along with the countless other responsibilities you have as a landlord, the financial landscape can be difficult and onerous to navigate, even for the most experienced landlords. Treetops can help relieve the burden, allowing you to concentrate on the other aspects of being a successful landlord.

Where can Treetops help?

It is possible, with the right financial advice and services, for buy-to-let landlords to achieve a very rewarding return on investment. Whether you are a professional buy-to-let landlord or renting out a second property, Treetops can offer our professional services and expertise to help you get the most out of your hard-earned investment.

  • Preparing rental accounts
  • Reviewing expenditure to get tax efficiencies
  • Preparing tax returns
  • Capital gains tax advice
  • Landlord specific reliefs

Tax on buy-to-let: frequently asked questions

Call us at Treetops to talk through your tax obligations for buy-to-let property, and we can shine a light on the recent changes and help you to achieve the best tax efficiencies. As a starter for ten, here are a few useful questions and answers.

How does stamp duty work on buy-to-let?

Up until July 2020, the minimum threshold for Stamp Duty Land Tax (SDLT) was £125,000. In light of the coronavirus outbreak, the government has increased the threshold to £500,00. This measure is to stay in place until March 2021. Buy-to-let landlords will pay a slightly higher rate than those purchasing a property to live in. The new SDLT rates for buy-to-let properties in England are:

  • Up to £500,000 – 3%
  • £500,001 to £925,000 – 8%
  • £925,001 to £1.5m – 13%
  • Anything above £1.5m – 15%

How does income tax work on buy-to-let?

As a landlord, you are liable to pay income tax on rental income. All rental income must be declared on your annual tax return and the amount paid will depend on your income tax banding (20%, 40% or 45%). There are some recent changes to what can be deducted from rental income, please see How has tax relief changed for landlords below.

Can I avoid Capital Gains Tax on buy-to-let property?

The short answer is, no you can’t avoid capital gains tax on buy-to-let property. However, there are certain expenses that can be deducted to reduce the amount paid, for example, stamp duty, estate agent fees and expenditure on capital items. This is a good example of when it pays to employ the services of professional accountants to ensure that you maximise your capital gain.

What are the changes to Capital Gains Tax?

From 6 April 2020, the government changed the timescale in which Capital Gains Tax must be paid. Previously, it had to be stated in your annual tax return and paid by the end of the next financial year. It is now due to be paid up to 30 days following the completion of the sale.

Who pays Council Tax on buy-to-let?

In a rented property, it is usually the tenant that pays Council Tax. There are exceptions where the landlord is liable for Council Tax, such as flat-shares (or Houses in Multiple Occupation), and if the property is empty for a length of time. Properties rented to students are exempt.

How has tax relief changed for landlords?

Up until April 2017, landlords could deduct 100% of mortgage interest and other allowable costs from their gross rental income, before declaring their taxable income. This has been phased out by the government over three years and came into full effect in April 2020. Instead, landlords will receive a 20% reduction in tax liability. They are required to declare all of their income and then claim back 20% credit. 

As a result of this, many landlords could find themselves in a higher tax bracket and be faced with significantly increased costs. It is wise to seek out the professional advice of an accountant to find out more about how this affects your financial position as a landlord.

As a landlord, why should I choose Treetops to be my accountant?

At Treetops based in Farnborough, we understand the pressures involved in being a landlord, especially with the recent changes made to tax benefits. Our professional yet friendly team can help you see the wood from the trees and relieve the burden of preparing tax returns and rental accounts. 

We can also give you advice on Capital Gains Tax and seek out tax efficiencies, so your buy-to-let property or business can continue to prosper.

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