Keeping records is an essential part of running any business so it is important to file any relevant paperwork relating to your property carefully for when it is needed.
When you purchase a property, you should retain and file:
· Evidence of purchase price and how the property is owned, along with any related costs such as survey fees, legal fees, stamp duty etc
· Receipts for capital improvements, such as extending the property or adding bathrooms
· If you lived in the property yourself at any time, evidence of the dates you did so
· Any legal information about the property.
Ongoing, you should keep the following as these will be helpful to your accountant:
· Income (ie rent) and outgoings (agent fees, insurance, maintenance costs etc)
· Information on any other income, such as from a day job
· Outstanding mortgage information
· Details of any savings and other bank balances
· Details of any stocks and shares, life assurance policies and pensions
· Details of any other assets
· Information about your will, as well as any likely inheritances you may receive
Should you buy as a limited company?
Due to the changes in tax relief, some people are considering investing via a limited company rather than as an individual as you may pay a lower rate of tax and profits can be retained in the company so are not liable for income tax. It can also make it easier to pass on property to a family member after your death.
However, this is not the most suitable arrangement for everyone, and especially if you already own a portfolio of properties, as transferring ownership to a limited company could prove costly. And should you wish to transfer the property back to private ownership in the future, there will be tax implications here, too.
What’s more, you can only receive an income from the properties if a certain level of profit is achieved and, just as landlords have been squeezed on the tax front, company directors have taken a hit, too, as the dividend allowance has been cut from £5,000 in the 2017-18 tax year to £2,000 in the current tax year.
Property taxation is incredibly complex, so if investing via a limited company is something you are considering, you should definitely seek guidance from a tax expert who will be able to advise on your particular circumstances.
If you have any other queries about buying a property to let, or would like to check out a particular market, please do get in touch with your local branch to tap into our experience and local knowledge.
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