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Do I need an accountant as a landlord?

While there is no legal requirement to have an accountant as a landlord, there are still several excellent reasons to hire an accountant. The rules that apply to landlords are broad, detailed and can be complex to property owners who aren’t familiar with them.

It’s important to consider the specific rules that apply to:

  • Residential lettings,
  • Holiday lettings,
  • Commercial lettings

These all have different requirements to follow to make sure that you pay the correct tax. Hiring an accountant ensures you have met the correct conditions.

An accountant will also help you to plan things such as Capital Gains Tax and Inheritance Tax. These can be complicated to navigate, and your accountant can simplify it for you, helping you look to the future. We ensure you save money by claiming all the allowable expenses available to you while providing you peace of mind that you are doing things correctly.

What software do we recommend for landlords?

Using software to track your income and outgoings. For smaller landlords, a simple spreadsheet is usually perfectly adequate for tracking your finances.

Landlords with 3-4 properties or more may find it useful to be a little more organised and proactive. We recommend that you have a dedicated bank account, which you can then use together with accounting software such as Xero and Quickbooks. We are experts in these tools and recommend their use.

How much tax do I pay as a landlord?

As a landlord, you are expected to pay several types of tax. These include:

  • Income tax at a basic rate of 20% of profit and higher rate or 40% of profit
  • Capital Gains tax when you sell a property
    • For residential lets: a basic rate of 18% of profit and a higher rate of 28% of profit
    • For commercial and holiday lets potential tax reliefs are available, including Rollover Relief, Entrepreneurs Relief, and Business Transfer Relief
  • Holiday and commercial lets also carry reliefs for inheritance tax as they are classified as a business

What can landlords claim tax relief on?

Landlords are able to claim tax relief on a variety of things, including but not limited to:

  • Utility costs
  • Professional and agent fees and services
  • Cleaning and laundry
  • Repairs and maintenance
  • Mortgage interest and other finance charges
  • Advertising, promotions and welcome packs
  • Insurance

What are the new tax rules for landlords?

Some changes have occurred for landlords regarding tax in recent years. HMRC has ruled that the ability for Residential Lets to claim relief on mortgage interest will be phased out as follows:

  • 50% relief in the 2018-2019 tax year
  • 25% in the 2019-2020 tax year
  • No tax relief on mortgage interest after 2020

There will also be a new 20% tax credit on mortgage interest. The exception is residential lets held within limited companies, which will still receive full tax relief.

Some changes in approaches to tax planning for residential landlords

Due to the changes in the law, more landlords are purchasing Residential Lettings through limited companies. Other benefits include:

    1. The tax rate of corporation tax is 19%, slightly lower than basic rate tax and a lot lower than higher rate tax
    2. Mortgage Interest relief can be claimed
    3. Can be used to manage IHT liabilities and to distribute the property assets via shareholdings in the company to family members

Choose a landlord accounting service and make it easier to manage your finances as a landlord. Please get in touch with one of our team if you would like to find out how we can help you.

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