It is that time of year again where people start to think about ways to reduce their tax bill. With the deadline of 31 January for filing online returns fast approaching, it could be difficult to make any significant changes to your accounting practices at the last minute. With this in mind, here are 5 simple and legal steps land-lords can take to reduce their tax liability and save more money.
1) Take advantage of the rent a room scheme – you are able to rent-a-room in your main residence for £4250 per annum tax free each year. Make use of this allowance and it will save you hundreds in tax.
2) Landlord expenses – You can deduct a range of expenses from the taxable income you generate from rent. Many expenses lad-lords forget to include are wages of cleaners/gardeners, letting agency fees and ground rents.
3) Landlord energy-saving allowance – If you rent out a property, you can reduce your tax bill by up to £1,500 by claiming allowances on integral features such as installing a hot water system, insulation and draught proofing.
4) Tax relief on your mortgage – You can claim tax relief on interest payments on a mortgage taken out for a rented property (even a rented property abroad). Doing a bit of research on this to see if your mortgage and property qualify can end up saving you thousands over the years.
5) Reduce capital gains when selling a property – You normally need to pay Capital gains Tax on the increase in price of a rented property when you are about to sell it. However, if this is your main residence, you can sell it without having to pay a penny in Capital gains Tax. So go and stay in this house for a couple of months before selling it and put any bills in your name as proof and you will be able to save tons of money on tax by selling this way. You can find out more about Capital Gains Tax here.
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