Would HMRC Consider You a Landlord?

Rented Property

HMRC have released new guidance detailing examples of tax errors that landlords make. It focuses on scenarios where people become landlords but, for various reasons, are unaware of their tax obligations.

Ten common reasons for people becoming ‘unintentional’ landlords have been identified, along with real life examples of each. These include: renting out a house when you move in with a partner, renting out an inherited property, buying a property for a family member at university and renting out the marital home after a divorce.

It’s important for people to be aware that they can still be liable to tax even if they are ‘just covering their costs’. For example, only the interest element of mortgage payments are tax deductible, not the capital repayments.

In accordance with this new guidance HMRC have an ongoing Let Property Campaign under which individuals can declare untaxed rental income.

If you wish to consider your position please do not hesitate to contact Green & Co Accountants and Tax Advisors on 01633 871122 and our tax team can assist you.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

New Welsh Land Transaction Tax Receives Royal Assent

welsh land transaction tax

A new Land Transaction Tax (LTT) is set to replace Stamp Duty Land Tax (SDLT) in Wales, with effect from April 2018.

The legislation is similar to the existing UK SDLT legislation, and the new LTT will be payable by the purchaser when buying or leasing a building or land, in line with a series of set rates and bands.

Higher rates of tax will apply to purchases of additional residential properties, as is currently the case, but there are some additional rules.

The new LTT marks the latest step in the drive towards tax devolution, which has seen the introduction of the Land and Buildings Transaction Tax (LBTT) in Scotland, and the Scottish Rate of Income Tax.

The proposed rates and bands for the LTT are set to be announced by October 2017. The Welsh Revenue Authority (WRA) will be responsible for the collection and management of the LTT from April 2018.

For more information on the Land Transaction Tax please contact our tax team.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Are You Affected by Inheritance Tax?

Inheritance Tax.jpg

The Inheritance Tax (IHT) collected by HMRC for the year June 2016 to May 2017 saw an increase of 9% on the previous year, rising to over £5 billion for the first time.

According to law firm Wilsons, this is attributed to rising property values and the freezing of the basic Inheritance Tax allowance, which has remained at £325,000 since the 2009/10 tax year.

It will be interesting to see how the new family home allowance (officially known as the main residence nil rate band) impacts on these figures. This relief was introduced in April 2017 and, according to HMRC, is intended to ‘reduce the burden of IHT for families by making it easier to pass on the family home to direct descendants for all but the largest estates.’

As well as this, there are other allowances which can reduce an individual’s exposure to inheritance tax and now, more than ever, it is important to assess how best to align your IHT position with your expectations for the future.

Green & Co have an Inheritance Tax and Care Home Review service that we run in conjunction with a local solicitors. If you’d like to discuss this service or any related matters please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

To Have, Hold & Share Rental Income Tax Efficiently

Rental Income Tax.jpg

As of 6 April 2017 the tax relief landlords receive for mortgage interest and other finance costs is restricted. The restriction is being introduced gradually so that by 2020/21 landlords will receive tax relief for finance costs at basic rate (currently 20%) instead of at the rate at which they pay tax.

This change does not just affect higher rate taxpayers.  Some people may find that, even though they are currently a basic rate taxpayer, as finance costs are no longer deducted in calculating their net rents, their income can be pushed into the higher rate bracket.

For spouses and civil partners who jointly own rental property, in the absence of an agreement to the contrary, the profits will typically be split 50/50. This can however be inefficient for tax purposes if one spouse is a basic rate taxpayer and the other is taxed at higher rate.

In such circumstances, they can register a beneficial ownership on the asset which stipulates a different ownership split, for example 80/20 and submit Form 17 to HMRC in order to tax the profits as such. This should of course be discussed with the experts in application to your personal circumstances before implementing.

If you’d like any further information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Landlords Kept in the Know as Renting Homes Act Moves Forward

Neil Soundy and Daniel Bellis

The South Wales Argus highlight another successful Gwent Landlord Forum.

Landlords from across south east Wales have again received expert advice, support and insight into the ever-changing rental landscape as part of the bi-monthly Gwent Landlord Forum.

The event, held by Cwmbran-based Rubin Lewis O’Brien, Green & Co Accountants and Tax Advisors and Lettings agency SerenLiving, took place at the Parkway Hotel.

Two guest speakers gave informative presentations to a packed room, where landlords were informed of the ins-and-outs of operating as a limited company, AIRBNB and the Renting Homes Wales Act.

Opening the evening was mortgage advisor Neil Soundy, who spoke about the benefits of buying property as a limited or trading company, the basic taxation on limited companies and buy to lets, lower rental coverage requirements and AIRBNB for landlords.

The second speaker was Daniel Bellis, a policy officer for the Residential Landlords Association. Daniel discussed the growing concerns of landlords as the Renting Homes Wales Act has come into effect, including the creation of standardised contracts across the rental sector, fit for human habitation regulations, changes in abandonment procedure and changes to joint contracts.

Ed Gooderham, director of Green & Co Accountants, said: “It’s great to see the forum grow with more and more people attending every session. Both speakers were of great quality, providing our landlords with an informative insight into complex topics. Our continued aim is to provide local landlords with as much information and support as possible, and attendees regularly feedback to us how much they enjoy these events.”

The next Gwent Landlord Forum will take place at the Parkway Hotel in Cwmbran on Wednesday July 12. For more information, please contact Rubin Lewis O’Brien, Green & Co or SerenLiving.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Commercial Tenancy Forum Launches

20170125_180907155_iOS

Last weeks edition of the South Wales Argus features an article on our new Commercial Tenancy Forum.

Organisers of the Gwent Landlord Forum have launched a sister-event aimed at the commercial market.

The first Gwent Commercial Tenancy Forum will be held at the Parkway Hotel, Cwmbran, on Tuesday 20th June from 6.30-8.30pm. The event will inform local business owners who currently rent their commercial premises to keep up-to-date on the latest tenancy legislation.

Cwmbran-based Rubin Lewis O’Brien and Green & Co Accountants and Tax Advisors are behind the successful residential event.

Sam George, Managing Partner at Rubin Lewis O’Brien, said: “We’re really excited to launch the Gwent Commercial Tenancy Forum and we hope that it will continue to build on our already successful residential landlord forum.

“This is set to be a fantastic opportunity for commercial tenants to learn of the support and funding that is available to them. We aim to ensure both tenants and landlords are fully informed on all aspects of commercial lettings.”

The guest speaker will be Andy Harvie, Director of TPG Consulting, a group of Chartered Building Surveyors who offer property professionals expert advice on all building and property related matters. Mr. Harvie’s range of experience has seen him offer solutions to clients with complex requirements, his talk will focus on the the dilapidations of commercial properties.

Mr George continued: “We are keen to continue informing both commercial tenants and residential landlords that there is available support to all parties. Andy is an experienced and knowledgeable professional who will be able to help those in commercial lets understand the continually changing policies and the potential financial implications.”

Please contact the organisers directly for tickets to the free event, or register online:

https://www.eventbrite.co.uk/e/gwent-commercial-tenancy-forum-tickets-34570251553

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

First Welsh Landlord Fined Under Rent Smart

law

A Welsh landlord was the first to be fined last week under the new housing regulations in Wales.

Appearing before magistrates in Newport, charges were brought against him which included failing to register a property of multiple occupancy.  Since November 2016, all landlords must register and declare multiple occupancy properties with Rent Smart Wales, as well as undertaking training to ensure they are aware of their obligations under the legislation covering rental properties.

The property owner in question was fined a total of £4,550 covering numerous offences under the Housing (Wales) Act.  A representative from Rent Smart has called the prosecution a “milestone” and says it sends out a message that non-compliant landlords cannot continue to ignore the regulations without penalty.

Those who haven’t already done so are urged to come forward and register now to avoid falling foul of the law.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

South Wales Argus Features Another Highly Successful Landlord Forum

imgID104609972.jpg.gallery

The South Wales Argus highlight another highly successful Landlord Forum, held at the end of March. Green & Co’s own Leanne Flanagan opened the evening in front of another large crowd.

Property landlords from across South Wales received advice and support in light of the recent budget as part of the bi-monthly Gwent Landlord Forum.

The event, held by Cwmbran-based Rubin Lewis O’Brien, Green & Co Accountants and Tax Advisors, and lettings agency SerenLiving, took place at the Parkway Hotel.

You can read the whole article here.

If you are interested in attending our next Landlord Forum, due to be held on May 31st, please get in touch now to register your interest.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Mates Rates – Letting your property at below Market Value

Letting your property.jpg

When you let a property to a third party for a market rent it should be relatively straightforward to calculate your taxable rental income, or loss if applicable. A market rent is that which a landlord can expect to receive in accordance with rents charged for similar properties in the same area. If your rental income exceeds the allowable expenditure incurred the profit will form part of your income and if the allowable expenditure exceeds the income then, assuming you meet all criteria, you will have a loss which you can carry forward and offset against future rental income.

There are some circumstances where a market rent is not charged. For example, a parent may let a property to their child for a lower amount, as parental duty dictates.  In this instance the expenses incurred, such as mortgage interest, landlord insurance, etc., may be greater than the rent received. If this is the case, then the expenses are not sustained wholly and exclusively for business purposes and in strict terms should not be claimed. However the good people at HMRC do allow expenditure to be claimed up to the value of the rent received, therefore resulting in no profit no loss. As a result, however, any actual ‘loss’ will be lost.

Should you have any Landlord tax queries please contact Green & Co on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Landlords: Is your Tax on the Up from April 2017?

Mortgage Interest Relief.jpg

From 6 April 2017 the relief that Landlords receive for mortgage and loan interest on residential lettings will be restricted. It marks a big change for Landlords as it is estimated that one in five will be affected by the policy.

Under the new rules, by 2020/21, finance costs will no longer be deducted from the rental income received (thus giving relief at whatever rate of tax you pay); instead they will be subject to basic rate relief, currently 20%.

The changes will be brought in gradually so that the following proportion of interest costs will be relieved in the normal way in the respective tax years.

2017/2018                           75%

2018/2019                           50%

2019/2020                           25%

2020/2021                           Nil

The balance of costs for each year will be relieved at basic rate.

This change does not just affect higher rate taxpayers.  Some people may find that, even though they are currently a basic rate taxpayer, when the finance costs are no longer being deducted in calculating their net rent, they may be pushed into higher rate tax.  And relief is only available at basic rate.

HMRC announced this change in 2015 in order to give Landlords time to prepare for the impact. If you haven’t done this already then there’s no time like the present (meaning… act NOW!).

Contact us if you would like to discuss your situation with one of the Green & Co team.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.