Buy-to-Let & Residential Property Tax

“We work with many property investors, landords and buy-to-let investors and can help them navigate the complexities of tax legislation.”

Priyank Bhagat
Associate Accountant

Buy-to-let landlords Image

Are you a buy-to-let investor, property dealer or developer? Many of our clients own a portfolio of properties so we work closely with them, to navigate the complexities of property tax to remain compliant to and minimise their tax burden.

Tax planning services for buy-to-let landlords and developers

Talk to the tax team at RA Accountants about:

  • Tax reduction strategies for rental income
  • What is a repair and tax deductible and what is capital and not
  • When to use a Limited Company to save tax
  • Trading income versus Capital Gain considerations and advice
  • Capital Gains rollover and holdover considerations
  • Stamp duty planning
  • Tax efficient mortgage structures
  • VAT considerations of property deals
  • Making the most of the Principal Private Residence election
  • Tax issues on the sale of part of your residence
  • Second homes
  • Inheritance Tax considerations

Different taxes apply in different parts of UK

Different taxes apply to the purchasers of property in different parts of the UK: Stamp Duty Land Tax (SDLT) in England and Northern Ireland, Land and Buildings Transaction Tax (LBTT) in Scotland and Land Transaction Tax (LTT) in Wales. Each tax has its own thresholds and rate bands.

The SDLT nil rate threshold, which is normally £125,000, has been temporarily increased to £500,000 until 30 June 2021, after which it is due to drop to £250,000 until 30 September 2021, when it will revert back to its normal level. For LTT, the nil rate band is £250,000 until 30 June 2021, after which it reverts back to £180,000. The LBTT nil rate band is £145,000.

If you buy a second home for £40,000 or more, which is not a replacement for your main home, you must pay a land tax supplement on the entire purchase price. For SDLT and LTT this is an extra 3% and for LBTT it is an extra 4%.

For example, if in July 2021 you buy your main home in England for £400,000, you will pay paid SDLT of £7,500, but if you buy the property as a second home or to let, the total SDLT charge will be £19,500.

Buying residential property via a company

If you buy your residential properties through a company, that company must pay the 3% or 4% land tax supplement on all purchases of over £40,000. Where the residential property is acquired in England or Northern Ireland for more than £500,000, the company may have to pay SDLT at 15% if it does not intend to use the property for a commercial or charitable purpose.

In addition, where a company holds a residential property located anywhere in the UK, which is not commercially let to an unconnected tenant or acquired for development, it may have to pay the Annual Tax on Enveloped Dwellings (ATED). This annual charge starts at £3,700 for 2020/21 and applies to properties acquired for more than £500,000, or which were valued above that level on 1 April 2017. Higher value residences can attract significantly higher charges.

From 1 April 2021, any non-resident buying UK residential property in England or Northern Ireland will normally have to pay a further 2% SDLT supplement. There are different definitions of non-residence for SDLT purposes compared to normal statutory rules, so it is possible for an individual or company that is otherwise UK resident to be subject to the supplement.

For more information on owning a buy-to-let property, take a look at our complete guide to buy-to-let properties in the UK.

If you are a landlord, own buy-to-let properties or have a portfolio of properties, please do get in touch to discuss possible tax planning strategies. We would be very pleased to have the opportunity to discuss your personal circumstances and how to plan for the future.

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