Following the last two government budgets, tax has become an even hotter topic for property investors and landlords alike.
Property expert Anil Mohanil shares his top tips on managing your tax and accounts for a successful property business
On Tuesday 18 April, chartered accountant and property investor Anil Mohanil was the guest speaker at the Monthly Female Property Alliance’s latest networking event at the Doubletree Hilton Victoria to talk about managing taxes when investing in property.
The most important thing, Mohanil says, is to understand what you are doing and why you are doing it: “Whether you’re a seasoned investor or a beginner looking to start your property portfolio, it’s important to have a clear strategy and then seek the right advice from a professional before progressing.
“You’ll read and hear about different approaches for seeking tax efficiencies to maximise your profits; from rent to rent to setting up separate management companies. While these can be effective strategies, they won’t work for everyone and can prove very costly to unwind if entered without proper planning and guidance.”
Keeping up to date with changes to regulations is also essential. Recent examples include:
• Landlords with an annual turnover of more than £10,000 (but less than £85,000) will be required to submit quarterly returns from April 2019. For landlords with a turnover of over £85,000, this will come in to effect from April 2018.
• If your residential property is owned or partly owned by a company and is valued at more than £500,000, you need to file an annual tax on enveloped dwellings (ATED) by the end of March each year. This should be completed for each individual property owned over this value. The minimum value was reduced from £500,000 to £1 million in 2016.
• Always consult with your local authority when considering purchasing (or turning an existing property into) a house of multiple occupancy (HMO). Licensing, fees and taxes vary across the UK, and with the government offering grants to local authorities for increasing tax revenues, landlords in some counties are feeling the pinch.
If you’re new to the property game and are not operating as a limited company, there are some simple things you can do to avoid the common pitfalls:
• Keep excellent records and all receipts, but remember that costs for preparatory work (e.g. travel expenses for viewings) cannot be claimed as expenses.
• If you’re carrying out any building work on your property, make sure you keep estimates and a detailed schedule of work.
• Ensure you separate your properties for reporting purposes – particularly if you have a mixed portfolio consisting of jointly-owned properties.
• Don’t wait until January to give your records to your accountant – this is the busiest month in their calendar year!
Finally, as you grow your property portfolio, focus on building up a ‘power team’ of people to help you – from your accountant to your insurance broker – you can leverage their expertise to keep you on track.