The document provides guidance on property letting taxes in the UK, including: - Stamp Duty Land Tax is charged on property purchases at incremental rates up to 12% depending on the value, with higher rates for additional properties. - Income from property lettings is taxed as income at income tax rates of up to 45% or corporation tax of 19% if owned through a company. Allowable expenses can be claimed to reduce taxable profits. - Capital Gains Tax of 18% or 28% may apply on gains made from selling properties not eligible for the main residence exemption. Private letting relief provides exemption up to £40,000 per owner. - Inheritance Tax at 40% applies to property value transferred between

2. Guide To Residential Property Letting
September 2019

4. DISCLAIMER
Clemence Hoar Cummings will not accept liability for any actions or
inactions you may take as a result of this presentation.
Why? – because you are all unique with your own individual
circumstances and plans for the future. There is no substitute for
professional advice tailored to your individual needs.
UNCERTAIN TIMES
Tax rules quoted are those in force at present. If the government changes
then we could be in a completely different taxation environment.

5. Topics for today
• Stamp Duty Land Tax (SDLT)
• Tax on Income – Income Tax and Corporation Tax
• Taxes on Capital – Capital Gains Tax and
Inheritance Tax (CGT and IHT).
• Making Tax Digital (MTD)
• Using a company
• VAT – Briefly

6. Property Tax
• Good news - property investment is still an effective investment and
regular income source, if organised and funded efficiently.
• Mainly residential today- raft of other issues for commercial properties.
• Your future plans for any property you own must be considered carefully
• It should help determine the basis of ownership

7. Property Tax
TYPES OF OWNERSHIP
Individual
Joint tenancy - often married couples will own as joint tenants -
Survivorship
On death of one spouse the remaining half will pass automatically under
survivorship to the surviving spouse before the will or intestacy rules are
considered.
Tenants in common
Under tenancy in common the share held can be passed separately on
death according to the will or under the intestacy rules.
Limited Liability Partnerships
Companies
It is possible to change the type of ownership but there will probably be
costs involved

8. Property Tax - On the way in
• Stamp Duty Land Tax
• Incrementally on purchases and 3% additional charge for let properties
with a value >£40,000
Property Value One Property
Owned
More than one
property owned
The rate is incremental so if you buy a flat
for £275,000, the tax is calculated as:
Up to £125,000 0% 3% 0% for first £125,000 = 0
The next £125,000 2% 5% 2% for next £125,000 = £2,500
The next £675,000 5% 8% 5% on final £ 25,000 = £1,250
The next £575,000 10% 13% £3,750
Remaining amount 12% 15%
For first time home buyers there is no SDLT
on the first £300,000 and 5% on the

9. Property Taxes – During ownership and
afterwards
• Income Tax/Corporation Tax on letting profits at marginal rates of tax
• Capital Gains Tax on transfer- whether by gift or sale. Always record all
capital expenses for eventual relief on disposal 28% for residential
properties (20% for commercial) – some reliefs available.
• Inheritance Tax on transfers during lifetime and on death- unfortunately
no immediate automatic relief for let property, however, any loans at
death are offset against the value of the property on which they are
secured. – 40% on net value

10. Property Tax
Basic Income Tax regime
• Notifying HMRC- SA1. Very simple form requesting a tax return
• Tax return and simple letting accounts to be prepared to report
profit or loss during reporting period. Receipts and Payments Basis.
• Tax due by 31 January following tax year end after payments on
account in January of tax year and July after end of tax year – could
become quarterly if MTD rules are applied.
• Maximise claim for tax allowable expenses

11. Property Tax
Basic Corporation Tax regime
• When you form a company HMRC are notified of its existence and
they will write asking for a return
• Tax return and simple letting accounts to be prepared to report
profit or loss during reporting period. Accruals Basis unless using
micro accounts
• Tax due by 9 months after the end of your Accounting Period. (could
be any month end) Tax return due 12 months after end of
Accounting Period
• Watch for first period of accounts. It will probably have two
accounting periods
• Maximise claim for tax allowable expenses

12. Property Tax – what you can claim
Tax allowable expenses
• General rule is that an expense is tax allowable if it is
- ‘wholly and exclusively‘ for the purposes of the letting
• e.g. management fees, insurance, gardening, cleaning, decorating,
mileage
• Record all relevant expenses as may be allowable either against
income or eventual gain

13. Property Tax
• Capital v Repairs
- Buildings/structural v repairs/redecoration (earlier tax relief if repairs)
• After purchase /before letting
• Replacement Furniture Relief
- Applies whether furnished or unfurnished but not holiday lets
- No improvement element. (e.g. washing machine replaced with
washer/dryer
- less(any) second hand value received for original
- BEST TO KEEP A LIST OF ITEMS PURCHASED - good record keeping generally

14. Income Tax on Property
Profits or losses can arise
All property profits and losses offset (unless at nominal rent then no loss relief e.g. to a
family member)
Any 2019/20 property profits taxable as follows:
Tax payable after £12,500 Tax free allowance and other income (excluding dividends)
so treated as top slice of income but before capital gains calculation
Total Income up to £37,500 at 20%
Total Income £50,001 to £100000 at 40%
Total Income £100,001 to £125,000 at 60% (withdrawal of personal allowance)
Total Income £125,001 to £150,000 at 40%
Total Income Above £150000 at 45%

15. Property Tax - higher rate tax relief on interest
now gone (almost)
New mortgage interest rules now in force (historically mortgage interest
often created a loss)
- Mortgage interest relief under current rules finally withdrawn from 6
April 2020
- Interest no longer a charge against rental income
- By 2021 just a fixed 20% deducted against your tax liability (if any)
therefore NOT included in letting accounts.
- Therefore impact on marginal rates of tax
If no tax liability, mortgage tax relief will be lost. (i.e. cannot use interest to
create a loss and carry forward)

16. Property Tax - Losses
Property losses can only be offset against in year property profits or
carried forward against any future property profits.
BUT - trading losses can be set off against all income including rental
profit

17. Rent a room relief
• Income received from the letting of furnished accommodation which is
part of an individuals main residence. The accommodation must be
shared in order to claim. Use of a home while you are away does not
qualify for relief.
• The income is exempt providing the rent, before deductions, does not
exceed £7,500 per tax year. This is reduced to £3,750 when someone
else also receives income from the property.
• If the gross rents exceed the above amounts you can elect to be
assessed on the excess or alternatively you can choose to deal with the
income in the normal way claiming the expenses incurred.
(useful if you have gifted a property to a child and they have a lodger)

18. Capital Gains Tax
• Main Residence Exemption
• No CGT on gains while a property is your only or main residence
• If more than one property and no election made HMRC will decide
based on facts, but not necessarily where you spend most of your
time
• Address for utility bills and bank statements, voter registration
• CGT charged at 18% or more likely 28% on residential property
• Companies pay Corporation Tax on gains at 19%

19. Capital Gains Tax - Private Letting Relief
Private letting relief is a CGT relief which is given on the sale of a
property which has been your main residence at some time during the
period of ownership and has also been let as residential accommodation.
• The private letting relief due is a maximum of £40,000 per owner.
• Therefore if the property is owned jointly you could claim up to £80,000
of letting relief.
• BUT the Letting relief is the lower of:
1. The Net gain on the sale of the property before the annual exemption.
2. The principle private residency relief due in respect of the ownership of the
property and
3. £40,000

20. Non-resident Landlords
If you own a property in the UK which you rent out but
where you reside overseas you are a non-resident
landlord
• Responsibility for the declaration of income rests initially with the letting agent or
tenant.
• Where you have a letting agent, the amount subject to tax is the rent less the expenses
for that quarter. If there is no letting agent, the tenant should deduct tax at the BR from
the gross rent and remit this to HMRC, unless the annual rent is less than £5,200, in
which case it can be paid over gross to the landlord.
• You can apply to HMRC for exemption from the scheme so that the landlord can receive
the rent gross. The landlord needs to show that all his tax affairs are up to date and self
assessment tax returns are being submitted in the UK. A claim for UK personal
allowances via a self-assessment Tax Return can be made in certain circumstances.
• If you are not resident in the UK and disposals of a UK residential property must be
reported to HMRC within 30 days of the conveyance of the property. This also applies if
you gift a property. This report is required even if you submit an annual UK Tax Return.
(This may also be introduced for all UK property sales in the future)

21. Inheritance Tax
• All property forms part of your estate when you die, net of any
loans attaching to it.
• If you are transferring a property to avoid IHT on death then CGT is
probably payable unless principal private residence. There is no
hold over relief for transfers of residential property (other than
between spouses), unless you are putting them into a trust. No
settlor interest within 6 years.
• Lifetime transfers of assets into a trust if over the lifetime allowance
will attract IHT at 20%

22. Property and Trusts – Potentially useful to
ensure your estate ends up where you want it
A trust is a separate entity for tax purposes
• When a property is transferred into or out of a trust there will be a disposal for CGT
purposes although the gain can be ‘held over,’ although this may affect the principle
private residence relief due on disposal. However watch for IHT on discretionary trusts
• This means that if a Trust holds a property it is the Trust that will need to report the trust
income and expenses. The net income is then taxed at 45%.
• A trust only has a CGT exemption of half of the standard CGT exemption.
• If the income is distributed to the beneficiaries they would then report this on their tax
return with a tax credit for the tax paid for by the Trust. This may of course result in a
refund for the beneficiary.
• There could be a further tax liability when the Trust comes to an end and/or every 10
years when a 10 year charge arises of up to 6% of the value of the assets in the Trust.

24. MTD – Update
Nothing finalised yet
Could be a threat but depends from whose perspective
• HMRC will have in one place significant information
about you – Your Digital Tax Account
• Information that can be analysed for risk
• Risk of under-declared income
• Penalties and interest

25. INCORPORATION – PART 1
The most frequently asked questions by clients - Should I
buy my property through a company?
Advantages-
• Full relief for mortgage interest
• CT rates of 19% and falling over the next few years and
possibly down to 15%
• A company may have multiple shareholders.
• Only need to make £12,345 of profit to repay £10,000 of
loan. A top rate tax payer may have to earn £18,182 to
repay £10,000 borrowed personally. Higher rate -
£16,667

26. INCORPORATION – PART 2
Disadvantages-
• still the 3% hike in stamp duty
• More detailed accounts and Companies Act compliance
• The company may need to raise a mortgage to purchase the
property for new companies this may be difficult
• Cannot dip in and out of owner occupation without BIG tax
consequences
• A double tax charge on extracting income and gains after a
sale into individuals’ accounts. Top rate tax payers 50% on
income, 35.2% on liquidation of company. BUT income
sheltered at 19% until drawn from company

27. INCORPORATION – PART 3
ATED compliance (Annual tax on enveloped properties) –
• Applies to all companies which own any residential
properties in excess of £500,000.
• If property ceases to be let then an actual charge
starting at £3,500 per year will arise.
• There are a number of exemptions and reliefs
available; in particular where the property is held
for rental or trading stock.
• A return still has to be filed to claim the exemption
otherwise penalties will arise.

28. INCORPORATION – PART 4
Can I transfer my existing properties into a company?
Possible to issue shares in exchange for value of property and so avoid
CGT – but
• Will not exempt you from Stamp Duty on transaction and…..
- Revenue clearance needed to avoid CGT but there are stringent tests
- Selection of own tenants
- Collection of rents
- Undertake own minor repairs
- Demonstrate that most of income comes from properties and you
work on them
• Early redemption charges on mortgages – higher costs inside a company?

29. IS INCORPORATION THE ANSWER?
• We are all unique
• We have different circumstances
• We have different aspirations
• One size does not fit all
SO IT ALL DEPENDS

30. VAT – Companies and Individuals
• Can apply only to Commercial Rental Income and
Expenditure
• Residential Property is usually outside the scope for VAT. So
that all repair costs and even extensions to existing property
will bear VAT which cannot be recovered
• In order to recover VAT on purchase costs for commercial
property, you will have to apply for VAT registration and “opt
to tax” that specific property
• VAT must then be charged on all lease charges relating to
that property

31. Further queries from clients
• Can I gift a property? You cannot gift a property to avoid CGT and IHT. The transfer
would be at Market Value.
• Can my parents transfer their property to me but still live there? You cannot gift a
property and remain resident in that property to avoid IHT - gift with reservation
• Can I make a property my Principle Private Residence for a few months? Your PPR
is a matter of fact. You must live in the property as your MAIN residence for a period
of time – we would suggest at least six months if not a year with all personal
documents showing that address such as your passport, driving licence, bank
account etc.
• Can I buy a property for my children? If you wish to buy a property for your children
as a buy to let, it is very unlikely that you would be able to take out a mortgage on
that property without being on the deeds. If you are on the deeds you will be
deemed to receive a % of the rental income for tax purposes. If you are on the
deeds you are a joint owner for IT and CGT. Guaranteeing the mortgage is an
alternative as are trusts.
• Can we buy a property and then all the income be taxed on my spouse? If a buy to
let property is acquired in the name of a husband and wife, the income must be
reported 50/50 of their Tax Returns. If you would like the income to be taxed on
your spouse then only your spouse should be named on the deeds and then you
need to look at the IHT implications.

32. Thank You
Any Questions

34. Romford & Shenfield
Welcome
Landlord & Tenant Update - Breakfast Seminar
By Holly Minney & Esther Marshall

35. Romford & Shenfield
Introduction
Speakers

36. Romford & Shenfield
Landlord & Tenant Update - Breakfast Seminar
Seminar topics :
• The End of Section 21
• The Tenant Fees Act 2019

37. Romford & Shenfield
The End of Section 21
• Current consultation to repeal section 21 of the Housing Act 1988
• Section 21 = Possession as of right
• Subject to compliance with statutory requirements

38. Romford & Shenfield
The End of Section 21
The Potential Impact of Removing Section 21
• Section 21 was introduced to bring greater flexibility to Landlords
• Tenants perpetually vulnerable
• Goodbye AST
• Welcome back Assured Tenancies
• Fixed Term Assured Tenancy or
• Assured Periodic Tenancy

39. Romford & Shenfield
So how would you evict your Tenants?
• You cant unless they have breached the tenancy agreement i.e.
rent arrears, breach of covenant- section 8 grounds.
• The Tenant would have the right to terminate the Tenancy at the
end of the fixed term or in accordance with a break clause
• Landlord can terminate on breach, if they wished to move in or if
they wished to sell
The End of Section 21

40. Romford & Shenfield
The current Section 8 Grounds
• Mandatory- e.g.
• 2 months rent arrears
• Landlord wishes to move into property (subject to prior notice)
• Landlord redevelopment
• Discretionary
• Some arrears
• Late payment of rent
• ASBO
• Breach of terms of tenancy i.e. disrepair
The End of Section 21

41. Romford & Shenfield
The End of Section 21
Reforms to Section 8
• Deregulation Act requirements to apply to section 8
• No fault grounds
• Occupation by Landlord & Sale of property
• Other Grounds
• Rent arrears, breach of tenancy agreement, Anti Social Behaviour,
Neglect, new ground for agricultural holdings

42. Romford & Shenfield
Notice
• Currently serve prior to the tenancy
• Will this requirement still exist or will these provision be more accessible
What does it mean for Landlords
• Increased costs as no accelerated procedure.
• Further delays with court as more hearings
• Less Landlords willing to rent
• No retrospective application
The End of Section 21

43. Romford & Shenfield
The Tenant Fees Act 2019
• Came into force 1 June 2019
• Aimed at protecting tenants from “unfair fees”
• Applies to all new or renewed tenancy agreements signed on or after 1
June 2019
• Will apply to pre-existing tenancies from 31 May 2020

44. Romford & Shenfield
The Tenant Fees Act 2019
• Aim – to reduce the costs faced by tenants at the outset of tenancies, and
throughout.
• Tenant should be able to see at a glance what the property will actually
cost them to rent, with no hidden costs.
• Ensure that fees charged reflect the real economic value of the services
provided.
• Increased competition between letting agents?

45. Romford & Shenfield
The Tenant Fees Act 2019
• What fees can a landlord charge?
• Rent
• Refundable deposit of no more than 5 weeks’ rent *
• Refundable holding deposit capped at no more than 1
weeks’ rent
• Payments associated with early termination (where
requested by tenant)

46. Romford & Shenfield
The Tenant Fees Act 2019
• What fees can a landlord charge? (Contd.)
• Payments capped at £50 (or higher if “reasonably incurred”) for
variation, assignment or novation of a tenancy
• Payments for utilities, communication services, TV Licence and Council
Tax
• Default fee for non-payment of rent / replacement of lost key if provided
for in tenancy agreement.

47. Romford & Shenfield
The Tenant Fees Act 2019
Prohibited fees
• Any fee which is not permitted is prohibited.
• Most common examples - Viewing fees
- Set up fees
- Check-out fees
- Third party fees

48. Romford & Shenfield
The Tenant Fees Act 2019
Implications of a breach
• Any term in a tenancy agreement in breach of the Act will not be
enforceable.
• Cannot use s21 procedure until any prohibited fees have been repaid.
• Tenant can recover unlawfully charged fees through the First-Tier
Tribunal

49. Romford & Shenfield
The Tenant Fees Act 2019
Enforcement
• Trading standards are responsible for enforcing the Act.
• Breach will usually be a civil offence with financial penalty of up to £5,000.
• Second offence within 5 years will be a criminal offence –
• Discretion whether to prosecute (criminal record and unlimited fine)
or
• Impose a financial penalty (up to £30,000)
• Discretion whether to add to register of rogue landlords
• Can apply for a banning order

50. Romford & Shenfield
What are the courts doing at the moment?

51. Romford & Shenfield
Thank You

52. Romford & Shenfield
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Any Questions?