If you’re a property investor, landlord or even just fancy letting out your spare room – there are tax, bookkeeping and accounting implications you need to know.
Finances in property and real estate can be seriously complicated, even to a seasoned accountant. That’s why it’s recommended you seek the help of a specialist property accountant to keep everything straight.
Let’s look at some of the basics involved.
What is involved in accounting for a landlord or property investor?
If you choose to become involved in buying, selling, renting out, investing in and maintaining property in the UK, you’ll be governed by various laws and regulations.
Considerations include:
Bookkeeping
Just like with any business, bookkeeping is a sizeable task which needs careful management. You need to keep track of all the money flowing in and out – everything from rental income, expenses, vendor invoices and maintenance costs – down to every last leaky tap repair.
Of course, it pays to be compliant and keep impeccable records in any area of accounting, and a specialist property accountant is the person to handle this.
Stamp duty
If you purchase property to rent out, it’s liable for stamp duty. This charge is higher than with properties bought for purely residential purposes. The additional property stamp duty charge is currently set at a sliding rate depending on the cost of the property – but it’s 3% higher than the stamp duty rate for first homes.
Capital gains tax
When selling an asset – such as a buy-to-let property, capital gains tax is likely due. You don’t pay tax on the full amount of the sale – just on the profits (or ‘gain’) you’ve made.
Income tax
This is due on the profits you make as a buy-to-let landlord after deducting allowable expenses. If your income from renting out a property you own is more than £2.500, you’ll need to declare it on a Self-Assessment tax return at the end of each tax year.
Class 2 National Insurance
If you run a property business (e.g., if being a landlord is a main occupation for you), you’ll need to pay these contributions to help you qualify for government benefits like the state pension.
Corporation tax
If you count as a property business, or trade as a limited company, you’ll be liable for corporation tax on your profits. On profits below £50,000, this is currently 19%.
Allowable expenses
You have certain allowances if you make money from property – from landlord insurance to agency fees, building repair and maintenance costs, tools, advertising costs and service charges.
There is a significant margin for error here, with some property developers and landlords paying far too much on things which could be deemed a capital expense.
Experienced Property Accountant
Property accounting can get complex which is why we have specialist professionals with experience and expertise to help with your ongoing bookkeeping, payroll, self-assessment and more. If you're looking for a tailored service to make your property investments efficient, then get in touch today!
Do you need a specialist property accountant?
Yes. We mentioned earlier that property accounting can get complex – and the truth is we’ve barely scratched the surface here.
That’s not to say a regular accountant couldn’t cover your basics, but if you’re serious about maintaining or growing a property portfolio, you’ll need to call in a specialist. Property-specific tax laws and tax reforms are myriad and constantly evolving – plenty of budding property developers fail by tying themselves in knots over the accounting side of things.
There are a great many ways that you can legally and legitimately save money on running your property business, including through tax savings, boosted income and allowable expenses. It just takes a specialist property accountant to identify them and pass on the benefits to you.
So, whether you’ve got a lodger in the attic or an international portfolio of hundreds of properties – seek the advice of a specialist property accountant ASAP.
QAccounting offer expert accounting services for property owners and landlords, providing a bespoke service and expertise. Get in touch with us today to find out more.
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