Tue 24 Sep 2019
Landlords have a lot of responsibilities, and you may be surprised at the tasks associated with the role. As well as preparing a home for let and meeting the needs of tenants, landlords have many administrivia duties. One of the essential tasks for landlords is to ensure they comply with tax regulations, but there is a lot to keep up with. We know many local landlords are looking for assistance in this matter, and we are pleased to provide a tax guide for landlords in Huddersfield.
Stamp Duty Land Tax (SDLT)
Any landlord looking to add to their property portfolio should be aware of the additional Stamp Duty Land Tax (SDLT) residential rates. When purchasing additional residential property for than £40,000; landlords have to pay an additional 3% stamp duty above the standard rates, which means:
· up to £125,000; a landlord buying additional property pays 3% SDLT
· the portion from £125,001 to £250,000 for a landlord buying additional property is 5% SDLT
· the portion from £250,001 to £925,000 for a landlord buying additional property is 8% SDLT
· the portion from £925,001 to £1.5 million for a landlord buying additional property is 13% SDLT
· the portion above £1.5 million for a landlord buying additional property is 15% SDLT
Restriction of Allowable Costs
It used to be the case landlords could claim tax relief at their level of tax, so landlords on the higher rate could enjoy tax relief at 40% and 45%, on the additional rate. However, as of April 2020, tax relief for landlords will be restricted to the basic rate of income tax, 20%. This has been introduced gradually since April of 2017, with the 2019/20 tax year being the final year before the basic rate is applied in full.
Allowable expenses for Huddersfield landlords
The following expenses can be deducted from rental income:
· Accountant’s fees
· Council tax
· Gas and electricity bills
· General repairs and maintenance
· Household costs
· Insurance (including landlord insurance)
· Interest on the mortgage used to buy the property
· Legal fees for lets less than one-year-old or for renewing a lease less than 50-years-old
· Letting agent/management fees
· Rents (if you are sub-letting), ground rents, and service charges
· Vehicle running costs
· Wages of hired help and other services
· Water rates
It is vital landlords know what they can claim expenses for, as anything which helps them save money should be pursued in the current climate.
Changes to Wear and Tear Allowance
It used to be the case landlords could apply for wear and tear allowance on all fully furnished properties, but this practice ended in April of 2016. The current system means landlords can only deduct costs which they have incurred on replacing kitchenware, appliances and furnishings. The relief is made on a like-for-like basis, or the best modern equivalent, and any costs which arise in disposing of older items.
Capital Gains Tax
If you sell a property that isn’t your home, with a buy-to-let property being a perfect example, for a profit, you need to pay Capital Gains Tax. There have been changes to CGT in the past ten years, but the current rate applicable to gains made on the sale of a property is 28%. This amount must be paid regardless of whether a landlord looks to reinvest the profits.
If you’re a landlord in or around Huddersfield and you need support in understanding your tax position, contact ADM Residential, and we’ll be happy to help.
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