The two largest expenses of a buy to let business are capital expenditure and the interest deduction. At RSM we can advise you on the most tax efficient arrangements to help you finance and structure the purchase of a property and help you evaluate your existing portfolio.
Whether you own a property, or thinking of buying one, it is important to know the tax rules. This will allow you to make informed decisions on how to finance and structure the purchase.
Traditionally the two largest expenses of a buy to let business are capital expenditure and the interest deduction. Currently UK individuals are taxed on their profits at their marginal rate of tax which can be up to 45 per cent. Finance costs are in the process of being restricted to 20 per cent thus increasing the costs of these businesses.
Landlords can incur capital expenditure when refurbishing premises. A large proportion of this expenditure will be capital with no tax deduction claimed.
The replacement of like for like items of existing capital items in a buy to let business can be allowable for tax purposes. It is therefore essential that all capital expenditure is reviewed to ensure claims are fully made. Acquiring residential properties in corporates has become a preferable option for large investors. For existing investors with existing portfolios there is an opportunity to incorporate, this will need capital gains tax and stamp duty land tax considerations.
At RSM we can help you evaluate the pros and cons of how to own your existing portfolio and also advise you on the most tax efficient arrangements.