Tax Consultant - Spofforths
Having a spring clean of your legal and financial papers is a positive step. This may be something you have been putting off but the exercise could prove to be invaluable as it will save time and professional fees.
It is not uncommon to think of the general ‘six-year rule’ when retaining financial documentation. As a property owner it is likely that you will retain ownership of that property for a longer period than this and if you sell a property after this time you need to provide evidence of the costs relating to it.
It is recommended that as a landlord (or property owner more generally), any paperwork relating to the building itself is kept for the entire period of ownership. Documentation such as the original purchase documents - including completion statements, evidence of legal and agent fees and other associated costs - are all kept safe.
Where you carry out any work on the property it is important to retain evidence of invoices and a description of work done. You may also wish to take pictures of before and after the work is completed to evidence that the costs are either repairs (and you are claiming them as a deduction against your rental profits) or improvements and therefore using them as a way of reducing your Capital Gains Tax liability.
If you have ever lived in the property then I would also recommend evidence of the time spent there is retained. Photographs that are time and date stamped can prove to be crucial in proving you lived in a property as your home. Documentation such as bank statements showing a change of address at the time you moved, mortgage statements where you have refinanced to a buy-to-let or residential mortgage or similar third party evidence showing your decision to live elsewhere can meet this requirement.
With regard to your non-property personal affairs, my top practical steps:-
- Shred all out of date paperwork
- Only keep tax records going back seven years
- Store all passbooks, share certificates and deeds safely
- Record usernames and passwords for your digital assets, e.g. laptop/PC, mobile phone, online store accounts and subscriptions securely
- Keep your address book up to date
- Make a will and keep it up to date
It is vital to have an up-to-date will to ensure that any property or possessions are passed on to your family and friends as you wish. Many people believe that the assets of someone who is married will simply pass to his or her spouse. This is not necessarily the case, unless the will makes specific provision for it. If you die without a will, your assets will be distributed according to the law and your wishes will not be fulfilled.
I would also suggest you review your will if your circumstances changed due to remarriage or divorce, a business transaction, step children or you have concerns about inheritance tax or an outdated trust. Carrying out these steps will help enjoy the peace of mind that comes with knowing your financial affairs are in order.
If you liked this article then why not read more from Jo? Check out her article on how to trust your rental income.
You can contact Jo for more information either by emailing her at firstname.lastname@example.org or you can call 01403 253 282