Read this presentation from our 'Introduction to tax for landlords' free seminar. The presentation covers: - The expenses you can and can’t claim against rental income - How to structure your mortgage - A quick guide to gearing your investments - How to increase your chances of securing your next property You can also watch the online webinar at https://goo.gl/3Twjs0

1. Welcome to Andrews
Introduction to
Tax for Landlords
Sponsored by Andrews Mortgage Services

2. About Andrews
 Established in 1946
 85 estate agency and lettings branches throughout
the South of England
Not just sales and lettings:
 Mortgage Services
 Landmark Surveyors
 Homemover Conveyancing
 Andrews Property Services
 Leasehold Management
 Land and New Homes

3.  Last year, we helped more than 7,000 landlords let their
properties
 1,000 tenants on average register with us each week
 30% shorter void period than the UK average
 Multi-award winning
 Members of ARLA and TPO
Andrews Letting & Management

4. An Introduction to Tax
Karen Press
Chartered Tax Adviser

5. About Bishop Fleming
• Full service firm of Chartered Accountants
• Full range of services for businesses and
individuals
• The widest spread of offices throughout
the South West with 7 offices
• 24 Partners & 300 Staff
• Employing some of the region’s top
experts

6. An Introduction to Tax
• An introduction to Tax Compliance
• Allowable Rental Expenses
• Overview of tax rates
• Tax Planning

7. Tax Compliance – the basics
• Rental income is taxable!
• Register for Self Assessment by 5th October
• Tax return submission deadlines:
– 31st October (paper)
– 31st January (online)
• Tax due date 31st January
• Losses should be declared

8. Tax Compliance - Penalties
• Late tax return filing penalties
• Late tax payment penalties & interest charges
Time Penalty
> 1 day £100
> 3 months £10 per day, up to a maximum of £900
> 6 months £300 or 5% of tax outstanding if greater
> 12 months £300 or 5% of tax outstanding if greater
Time Penalty
> 30 days 5% of tax owed
> 6 months 5% of tax owed
> 12 months 5% of tax owed
Interest on outstanding balances, currently 3 %

9. Tax Compliance - Penalties
• Record Keeping
o Retain income and expenditure records for 6
years
• HM Revenue & Customs Enquiries
o Up to 30% tax based penalty for careless errors
on Tax Returns

10. HMRC Residential Property
Campaign
• Residential Property Landlords who have
not fully disclosed income including:
o Single/multiple lets
o Specialist student/workforce lets
o Furnished Holiday Lettings
• HMRC campaign offers best possible terms

11. HMRC Residential Property
Campaign
• Two part process
o Notification
o Within 3 months, Self Assess the tax, interest
and penalty (using online calculator) and pay!
• Expect HMRC to use information held to
target those that should have come
forward

12. Allowable
expenditure
against income
Agent &
management
fees
Mortgage
interest
Repairs and
maintenance
Mileage
Legal &
professional
fees
Wear & Tear
allowance
Property
enhancementsX

13. Renewals Basis
• 6 April 2013 removal of ‘renewals allowance’
for landlords of unfurnished properties.
• No longer a deduction for free standing
cookers, other ‘white goods’, carpets and
curtains.
• Exceptions where expenditure is a repair to
the property itself, ie cost of replacing
integrated white goods.

14. Tax Bands
Income Tax
Capital Gains Tax
£31,785 £150,000
20% 40% 45%
18% 28%
Notes:
• Tax free personal allowance £10,600
• Personal allowance is reduced over £100,000
• CGT Annual exemption £11,100
• Gift Aid and pension contributions extend bands
£31,78
5

15. Tax
Planning
Equalise
income
with
spouse
Non
resident
landlords
Maximise
mortgage
interest
deductions
Capital
Gains Tax
Planning
Inheritance
Tax
Planning
Claiming
Capital
Allowances

16. Loan Interest Planning
Main home Rental Property Total
Value £500k £250k £750k
Mortgage (£150k) (£100k) (£250k)
Capital £350k £150k £500k
Interest at 3% £4.5k £3k £7.5k
@ 20% £600 pa
@ 40% £1,200 pa
Mortgage Interest:

17. Loan Interest Planning
• Renting properties is treated as a business
for tax purposes
• If you have borrowed to invest capital into
a business, then the interest payable is a
tax deductible expense
• In most cases, the initial cash investment
was funded by an additional mortgage on
the main home

18. Loan Interest Planning
• There is a restriction on the maximum
amount of which relief can be claimed –
this is equal to the initial purchase cost of
the properties
• Can restructure and look to claim the
interest on the mortgage on the main
home

19. Loan Interest Planning
Main home Rental Property Total
Value £500k £250k £750k
Mortgage £0 (£250k) (£250k)
Capital £500k £0 £500k
Interest at 3% £0 £7.5k £7.5k
@ 20% £1,500 pa
@ 40% £3,000 pa
Mortgage Interest:

20. Equalise Income
• If you have a spouse or civil partner and
own a property jointly, it doesn’t have to
be on a 50/50 basis.
• Can transfer % of ownership with no
capital gains tax implications.
• Can own property in appropriate % to
maximise lower rate tax band

21. PPR Relief
• No tax on increases in value of main home due to Principle
Private Residence (PPR) Relief.
• Any property which has genuinely been occupied as a
taxpayers main residence can benefit from PPR relief
covering:
– Actual period of occupation as main residence
– Final 18 months of ownership (previously 36 months)
• PPR relief element = Qualifying Periods
Total Ownership Period

22. • In addition to PPR Relief, any property which is has been
occupied as a main residence and then let out prior to sale
will also qualify for Lettings Relief.
• Lettings Relief provides a further exemption. The lower
of:
o Gain in Let period
o PPR relief amount claimed
o £40,000
Lettings Relief

23. • Each individual has a capital gains annual exemption, this
is £11,100 for the current tax year.
• If you own a rental property in your sole name then
consider transferring a % of the property if you have a
spouse or civil partner.
• Capital gains tax saving of up to £3,108 if you are a higher
rate tax payer
Capital Gains Tax Planning

24. Any questions?
kpress@bishopfleming.co.uk
01225 486333

25. A quick guide to
gearing your investments
Andrews Mortgage Services

26. Gearing your investments
 1 property – financed with cash
Purchase price £200,000
Rental income £12,000 pa

27.  4 properties – financed with a 75% LTV mortgage
• Purchase price £200,000 x 4 = £800,000 (for 4
properties)
• Deposit £50,000 x 4 = £200,000
• Mortgage £150,000 x 4 = £600,000
• Rental income £12,000 pa x 4 = £48,000
• Mortgage payments £6,750 pa x 4 = £27,000
• Net income £5,250 pa x 4 =
 Total net income £21,000 pa

28.  If property prices increase by 10%...
Capital growth on 1 property = £20,000
Capital growth on 4 properties = £80,000

29. Advantages
⁻ Increase opportunity for capital growth and
rental income
⁻ Deductible expenses for income tax purposes
Disadvantages
⁻ More property and tenant management
required
⁻ Less equity in each property
⁻ Tax implications – the higher rental income and
capital gains, the higher the tax amount

30. Accessing the best BTL deals
 Typically need a 25% deposit
 Cheaper rates only start with a 40% deposit
 Property needs to be in 'letable' condition
 On average rental needs to cover mortgage
payment by 125% at rate of 5%
 Look out for a high arrangement fees

31. Andrews Mortgage Services
 Independent mortgage advice
 Access to 'whole of market'
 Specialist BTL knowledge
 Exclusive rates
 Advice you on protecting your portfolio
 Saves you time and money
 Award-winning

32. How to get the best properties
Get Market Ready
 Ready
 Willing
 Able

33. What next?
 Register with Andrews Investor Club
⁻ Portfolio assessment
⁻ Advice on how to maximise and expand it
⁻ Facilitate the purchase of future investment
⁻ Market for sale property in your portfolio
⁻ Designated independent Mortgage Advisor
⁻ Monthly market update with top properties to invest in and list of
mortgage best buys
 Speak to an independent mortgage advisor
about gearing
 Speak to Bishop Fleming about Tax

34. For further details contact
Tax information
Karen Press
Chartered Tax Adviser
kpress@bishopfleming.co.uk
01225 486333
Sales, lettings & mortgages
information
Speak to an advisor tonight, or
contact your local Andrews
branch
andrewsonline.co.uk

35. Any questions?