As a landlord, you will know only too well that you must pay tax on your rental income. Thankfully, there are ways to reduce your tax bill. The most common way is to use the allowable expenses, but there are other ways to lower the amount of tax you need to pay that you may not be aware of.
Lower the stamp duty rate
The government requires home buyers to pay stamp duty based on the cost of their house purchase. One way to avoid paying more than you need is to arrange with your seller to pay for the fixtures and fittings separately. In this way, the seller gets their original price but the ‘cost on paper’ for the house purchase is less. This results in a lower stamp duty bill.
Avoid inheritance tax
To avoid the sting of inheritance tax, it is possible to gift your property, or a portion of it, to someone else. This most commonly occurs when landlords intend to leave a property to their children. When any ownership occurs between joint parties, it is a good idea to put a deed of trust in place. More information about how to arrange a deed of trust is available from solicitors such as https://www.parachutelaw.co.uk/deed-of-trust.
Increase your expenses
Deductible expenses can lower your tax bill. There may be expenses that you can deduct that you had not realised were valid; for example, money spent to improve a home is not considered tax-deductible, whereas money spent repairing a home is. Look closely at what you are spending to see whether the cost can be classed as repair spending rather than money spent making improvements.
Replacing domestic fittings
According to Landlord Today, the most common appliances to be broken by tenants are ovens and microwaves. Did you know that you can obtain a deduction for replacing these items? Other deductible replacements include kitchenware and furniture.
Being a landlord can sometimes be costly, so ways to save money are always welcome. Making the most of the tax-saving opportunities available will not only lower your end-of-year tax bill but also leave you with more money, which you can use to invest in your property. Another advantage is that by taking advantage of inheritance tax solutions, you will be able to leave more money in the pockets of your children when you are no longer around.