All your accounting needs with an accountancy partner who actually understands property.

• As a property investor, you are liable to Capital Gains Tax on the difference between the original cost plus any enhancement expenses and disposal proceeds.
• Loan or mortgage interest, maintenance and other operational costs can’t be deducted from gain (but can be claimed against rent received for income tax purposes.

• One of the most significant ways to optimise your portfolio is to incorporate it into limited companies. This is due to the differences in taxation between limited companies and individual landlords.

• There are a range of VAT rates applicable to property investing businesses, and those rates depend on the type of business you’re engaged in.
  • Residential Lettings: Most landlords don’t need to worry about VAT because residential letting is exempt.
  • Serviced accommodation (like Airbnb) are considered a holiday accommodation and is not exempt from VAT. As a standard rule, if your business sells more than the current VAT registration threshold, you must register for VAT.
  • New Residential Development are zero-rated so you can claim back VAT paid to labor and suppliers during development. The rules governing this process are complex, though, and never this simple. You need to speak with a knowledgeable accountant for the particulars.
  • Property Conversion: There is also generous potential VAT relief for property developers converting properties. Again, to work out the particulars, reach out to an experienced accountant versed in these areas.

• You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell or dispose of property that isn’t your primary residence.
• There are nuances to this, like whether the property was occupied by a dependent relative, is a business asset, or is a gift to a spouse/partner or charity.
• There are also different rules that apply if you are selling your residential home, live abroad, or are a company registered abroad.

Hearthstone is able to offer accounting services specialised to property investors and developers because we are property finance and mortgage specialists ourselves. We are prepared to advise you with tax and accounting concerns that cover the range of your property business in a way a general accountant simply cannot.

• There are numerous strategies you can approach when structuring your property investments and assets. None of these are a one-size-fits-all solution for maximising tax-efficiency, so you’ll want to work with a skilled accountant to determine which strategy is a match for your future vision.
  • Hold properties as an individual
  • Hold properties via an onshore or offshore company.
  • Hold properties via a trust that holds shares of the company on your behalf.

As long as they are wholly and exclusively for the purposes of renting out a property, the following are among expenses you can deduct from your rental income’s taxable profit (if you pay for them yourself):

• General maintenance and repairs.
• Water rates, council tax, gas and electricity.
• Insurance of landlord’s policies for buildings, contents
  and public liability
• Costs of services like wages for gardeners and cleaners
• Letting agent fees/management fees
• Legal fees for lets 12 months or less, or for renewing a lease less than 50 years.
• Accountant’s fees.
• Rents for subletting, ground rents and service charges.
• Direct costs like phone calls, stationary and advertising for new tenants.
• Vehicle costs (only for the proportion of time used for your rental business) including mileage.

• If you run a property business, you have to pay Class 2 National Insurance if your profits are in excess of 12,570 per year and what you do classifies as running a business (being a landlord, renting out more than one property, actively buying new properties to rent out).
• If you are renting property you personally own, the first 1,000 from property rental income is tax free as “property allowance.” You must report your income on a self assessment tax return if it is between 2,500-9,999 after allowable expenses, or 10,000+before allowable expenses.

Hearthstone accountants are well-versed in all manner of tax and financial concerns, since we are also investors and property managers ourselves.

• Firstly, you need to become familiar (or work with an accountant who is) with the latest tax laws. Use reliable resources.
• Document thoroughly and maintain digital, backed up records.
• File your taxes accurately and on time. Stay familiar with various filing deadlines and do not miss them.
• Be prepared for compliance checks by keeping your records always prepared in the event of an audit. If you are selected for a compliance check, make sure you are clear and timely in your communication with HMRC personnel.
• Seek expert advice with a tax advisor or accountant who understands the complexities of compliance in general and in your area of business in particular. Hiring someone who can continuously monitor your business is an essential part of keeping up with legislation, catching potential issues before they arise, and maximising potential savings.