Property Owners Accounting Tips
The tax rules for buy-to-let investments are changing but many still see property as an attractive investment at a time of low-interest rates and high demand. If you’re considering investing in buy-to-let – or improving returns on a property you already own, here’s our top 5 tips for landlords on how to save money.
Keep precise records to help you lessen your tax bills.
Regardless of whether a property is profitable, it still needs to be declared on a tax return. Even if it’s making a loss, a tax return could be beneficial to you in the long run as any losses can be offset against your future revenues (by carrying it over to a later year) or against the revenues from other properties in your property portfolio.
Budget for tax payments when considering an investment.
Put aside about one-quarter of your revenues from your properties in a savings account every month so when the income tax bill arrives, you have the funds to hand. If you already have substantial profits from other sources, you may need to put aside 40% or 50% of your revenues to pay the tax due.
Talk to someone about what costs you can claim.
There are still savings to be made and money to make within the buy-to-let market. We believe that to be forewarned about changes to tax calculations & tax relief is to be forearmed.
Go for yield and consider all costs.
Although the greatest benefit of a buy-to-let is about the future possibility of the property going up in value, the rental yield needs to be considered first and foremost. The yield is the annual rent received as a percentage of the purchase price. For example, a $100,000-worth property delivering $10,000 worth of rent has a 10% yield. It’s important to deduct all other running costs from this profit – letting agent fees, insurance, maintenance, etc. to get an accurate return on investment figure.
Keep abreast of all tax changes
With complex tax changes ahead, both in terms of tax relief breaks and the way tax is calculated, it pays off to be forewarned. Having the right information at the right time will allow landlords to make educated decisions before they’re greatly affected. There are many options out there to diffuse the impact from changing to holiday lets to remortgaging, etc. It’s worth sitting with a proactive accountant to work out what’s right for you.
David Lo is a recognised provider of accounting, tax planning and advisory services to all ...