There are plenty of factors to take into account if you want to become a successful buy-to-let landlord, but one that often gets overlooked is tax efficiency. Putting a few tax saving strategies for landlords in place may not be quite as glamorous as hunting down the perfect property, but when it comes to saving cash it can make a huge difference to your bottom line.

That’s why we thought it would be a good idea to share a few tax saving tips for landlords with you here on our blog. Armed with these simple bits of advice, you’ll be able to significantly (and legally) reduce your tax bill as a landlord, which will help get your buy-to-let business in better shape in time for next year’s tax return.

Let’s get started!

Set up a limited company

While it may require a fair amount of planning to pull off, setting up a limited company can be a great way to reduce your tax bill as a landlord. Not only will you be able to buy property through the company (which will allow you to offset costs against profits), you’ll also be able to employ yourself or someone else to manage the properties held within your portfolio.

This particular landlord tax saving strategy won’t be for everyone, but if it works for you the savings can be enormous. Give your accountant a ring to find out if you can benefit from transferring your properties to a limited company.

Extend to reduce

Putting money into your existing properties will help you avoid hefty stamp duty charges and should see the value of your portfolio rise at the same time. Recent changes in development rights mean that you can now extend your existing property further than you previously could, which should result in an increase of monthly income.

Providing you take into account the ceiling price of the area in which your rental is situated, real gains can be made by extending or expanding your property. One thing to bear in mind, however, is that if you are making significant improvements which could result in increased occupancy, you may be affected by the upcoming changes to the HMO rules.

From October (2017), property that houses 5 or more tenants will be required to have an HMO licence, which will mean passing the necessary checks and incurring the cost of obtaining the licence too. So, be sure to check out your local council’s licensing rules before taking on any expensive building work that could result in a change of your rental property’s status.

Make use of all available tax bands

Another way to potentially cut your tax bill as a landlord is to transfer your assets to your spouse. Capital Gains Tax is generally not paid when assets are transferred between spouses, so you could effectively make use of their lower tax bands.

There’s also the possibility that you will be able to pay less tax on your rental income too if their tax bracket is lower than yours. If the property in question doesn’t have a mortgage associated with it and you are not taking any financial gain from the transfer, you won’t have to pay any stamp duty either.

Make sure you are getting the most from your property

This may seem like a bit of a no brainer at face value, but you’d be amazed at just how much money is left on the table each and every year by landlords who do not have their rental properties reassessed. Getting your rental property revalued can make a huge difference, not only in terms of how much it is worth, but also the way in which your business is viewed by outsiders.

Having a more accurate assessment of how much your rental property is worth will strengthen your hand against lenders and get them to reevaluate your loan to value. Should your rental property price increase, your loan to value will obviously go down...and that could mean more choice and a better interest rate for your buy-to-let business.

If you are based in Coventry or in the West Midlands and would like an accurate assessment of your tax liabilities, give our tax advisors a call on 024 76601 7778 to get started.

Don’t be shy with your expenses

Now, obviously we’re not suggesting anything untoward here, but we do recommend that you claim everything you are entitled to if you want to become a tax efficient landlord. There are plenty of landlords who could reduce their tax bills simply by being a little more diligent about their expenses, so our advice is to make sure you claim for everything.

Keep every receipt and speak to your tax advisor or accountant about exactly what you can and cannot claim for...you’ll likely be surprised by how quickly these landlord expenses mount up! For example, things such as the costs of keeping a home office and your letting agent’s fees can all be offset against your profits, so why not claim for them?

Consider short-term lets

If you are in between tenants, there are ways in which you can lower your landlord tax bill. Costs such as your council tax and utilities can all be claimed as expenses during this time, but wouldn’t you rather be earning money rather than saving?

Sometimes it can be worth considering the option of taking on a short-term let during a void period in order to get some money coming in. As ever, if you are based in Coventry or in the West Midlands and would like further information give us a call on 024 76601 7778 to get started.

Be savvy when you sell

Too often, landlords lose money when they sell a rental property simply because they do not take full advantage of the available tax relief on offer to them. This is especially true of landlords with multiple properties, as they can reap the benefits of the 0% Capital Gains Tax band each and every year should they decide to sell one of their homes. Currently, the tax free figure stands at £11,300, which is a pretty good saving in anyone’s book.

Naturally, the best way to save tax as a landlord is to employ both a brilliant accountant and a reliable tax advisor who can assist you every step of the way. This article is intended to highlight a few ways in which landlords can lower their tax bills, but is not intended to be concrete advice.

If you are interested in becoming a landlord or would like to expand your property portfolio but want to understand your tax postion, give our tax advisors a call on 024 76601 7778 to get started.

Main office - 024 76601 7778 or info@cheylesmore.com.