Our fixed fee buy to let accountancy packages are truly all-inclusive and cover all aspects of accounts and tax involved in buy to let property investments as well as advice on potential purchase of further assets.

Our £215 per year package for personal tax return (for investors holding properties individually) includes:

  • Registration with HMRC
  • Initial tax planning meeting (by telephone or face to face depending on location)
  • Specialist in house buy to let mortgage advisor and financial planner
  • Referral to trusted conveyance solicitor partners
  • Bookkeeping system
  • Preparation of profit and loss account
  • Preparation and submission of Self Assessment Tax Return
  • Unlimited telephone and email support
  • Accounting reference to lenders

Our £575 per year package for limited companies (for investors holding properties through limited company) includes:

  • Registration with HMRC
  • Initial tax planning meeting (by telephone or face to face depending on location)
  • Specialist in house buy to let mortgage advisor and financial planner
  • Referral to trusted conveyance solicitor partners
  • Bookkeeping administration
  • Preparation of profit and loss account
  • Preparation and submission of Self Assessment Tax Return
  • Unlimited telephone and email support
  • Accounting reference to lenders
  • Preparation of Full Accounts and Abbreviated Accounts and submission to Companies House
  • Preparation Corporation Tax Return and submission to HMRC
  • Companies House Confirmation Statement prepared and submitted to Companies House
  • Payroll for up to 2 employees

Additional properties – £95 per year

Tax treatment comparison:

Subject

Held personally

Held through company

    Income Tax Income TaxTaxed on profits at marginal tax rate (up to 45%), regardless of when the money is withdrawn from the business. Corporation TaxLetting is a business for corporation tax purposes.

Profits and gains on disposal are taxed at corporation tax rate (20%).

Property Disposal:UK resident Subject to capital gains tax (CGT) at 18%/28%, after deducting any available annual exemption.The lower rates of CGT (10% or 20%) introduced from April 2016 do not apply to the disposal of residential property. An indexation allowance is available to companies, tax due is at corporation tax rates, as above.Payment date is subject to ordinary corporation tax payment deadlines.
Property Disposal: Non UK resident From 5 April 2015 a non-UK resident is subject to CGT when disposing of an interest in UK residential property. From 5 April 2015 a non-UK resident company is subject to CGT when disposing of an interest in UK residential property.ATED

From April 2013 gains from property that is subject to the ATED regime (see below) will be subject to ATED capital gains tax, charged at 28%.

Non-resident companies are subject to CGT under two regimes.

Extraction of funds  IncomeIn general profits are available for the individual as fully taxed either as rental income or CGT on disposal.

Capital

A disposal of a property at a profit will trigger a capital gain.

  • A disposal is treated in most cases at market value.

Incorporation

  • Incorporation will trigger a capital disposal: CGT payable at 18% or 28%.

 

Income taxPotential double tax charge when profits extracted as dividends by higher rate taxpayer, or by basic rate taxpayer (from April 2016).

Changes to dividend taxation from 2016/17:

  • All individuals can receive £5,000 dividends tax free regardless of other income
  • Three dividend tax bands: 7.5%, 32.5% and 38.1%
  • Tax credit abolished
  • Dividends received by pensions and ISAs are unaffected

Capital gains tax

Profits may be extracted as a capital distribution on striking off (provided that assets less than £25k), or as a capital distribution on liquidation.

New rules for transactions in securities have been introduced by Finance Act 2016 which took effect from 6 April 2016.

Ownership  The maximum number of legal owners of land and property is restricted to five.Owners need to decide whether to hold property as joint tenants, or tenants in common and also to consider the effect on joint tenants of changing beneficial interests in the property. A company may have multiple shareholders.
Losses  There is no sideways loss relief for property losses. Losses may be offset against other property income or carried forward. Locked into the company and cannot be offset against the owner’s other income.Losses can be offset against total company profits of the current or future years, as long as the rental business continues.
Annual Tax on Enveloped Dwellings (ATED)   No exposure to ATED charge. The ATED regime applies to high value residential properties held by non-natural persons (e.g. a company) however there is an exemption from the charge when the property is let on a commercial basis.The ATED charge is payable if the letting business ceases.

From April 2015 properties with a value of £1 million or more are affected; from April 2016 this fell to £500,000.

Stamp Duty Land Tax (SDLT)  Charged on purchase.From April 2016 a 3% premium applies on the purchase of an additional residential property.

Land and Building Transaction Tax (LBTT)

Charged on purchase from or gift by an individual to their connected company.From April 2016 a 3% premium applies on the purchase of residential property by companies.

Stamp Duty applies at a rate of 0.5% on share acquisitions of £1,000 or higher.

Inheritance Tax (IHT)  BPR relief is unlikely to apply in respect of let property: it is an investment asset.Beneficiaries of the estate on death will receive the property at market value so there would be no capital gains tax for them to pay on an immediate sale.

IHT and non-doms

IHT only applies to UK situated assets for a non-UK domiciled individual.

From April 2017, IHT extends to non-UK domiciled individuals (or their trusts) where UK residential property is held indirectly through a foreign company or partnership.

IHT Business Property relief will not apply to shares unless the company has significant other non-investment activities.See IHT Business Property Relief

On death a shareholder’s shares will benefit from an uplift to market value in the hands of the beneficiaries. Property held in a company receive no similar uplift.

Non-dom owners

From April 2017 IHT extends to non-UK domiciled individuals (or their trusts) where UK residential property is held indirectly through a foreign company or partnership.

De-enveloping  N/A The transfer of a residential property from a company back to its shareholders.
VAT  Residential lets are always exempt, however commercial letting can be standard rated if the owner has opted to tax.If the property qualifies as a furnished holiday let, then the income generated is standard rated and the owner will have to charge VAT if they are registered. Income from property letting is exempt from VAT with the exception of commercial letting which is standard rated if the company has opted to tax the building.The letting of furnished holiday lets is a standard rated activity.
Converting business into a trade  See Furnished Holiday Letting (FHL) for more detail about generating income from property as a furnished holiday let.A FHL qualifies as a business asset for CGT relief including roll-over relief. See Profits from dealing or trading in land.See Furnished Holiday Letting for more detail about generating income from property as a furnished holiday let.

 

 

KNBC Footer Large

Comments are closed.