Investing in property keeps you very busy with all the aspects of dealing with the property and managing tenancies, so tax matters usually come way down your list of priorities, certainly for the average landlord.
But the time comes when the excitement of buying and renting out your properties dies down a bit and you realise just how important your attention to book-keeping, tax and tax planning is. Your attention urgently needs to turn to administration matters and in particular, tax and the HMRC’s rules and regulations.
This is particularly important at the present time as the way you will interact with the tax system is changing. From 2018 it will become increasingly digital and most businesses, the self-employed and landlords will need to use software or apps to keep their business records, and to update HMRC every quarter. HMRC is currently working with software suppliers informing them of their requirements to enable them to produce compliant systems, and it has said that the underlying tax rules will be simplified to support these changes, but don’t be fooled by this – tax is invariably complicated.
There are two important aspects to keeping on top of your tax matters: the business of keeping appropriate records and completing annual accounts for your annual self-assessment tax returns, and in case the tax man comes knocking on your door to take a look at those records. But also, just as important, is the long-term tax planning aspect of your property investment business – capital gains tax and inheritance tax. Without an adequate knowledge which allows you to do some sensible tax planning, you are likely to pay a far lot more in tax than you need to.
Carl Bailey has been producing his by now famous property tax guides with TaxCafe® for many years now, and is a regular speaker at landlord events, shows and exhibitions. A qualified accountant, Carl is without doubt one of the foremost property tax experts in the country. These guides are updated regularly as the tax rules change, so it’s a must to make sure you are reading up-to-date information.
There is no sin in being tax savvy and saving yourself money (and this can be considerable) by avoiding, not evading tax. There is absolutely nothing wrong with ordering your affairs in such a way as to minimise your tax, as Lord Clyde’s famous ruling in the Ayrshire Pullman Motor Services v Inland Revenue  case says:
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”
If you attempt to master the intricacies of our highly complex and constantly changing tax system using just the information provided by the HMRC you will probably fail – it is a nightmare for the average layman. Using the HMRC website, although free, it is virtually impossible to get any real benefit from the attempt without years of experience as an accountant.
But a well written expert guide aimed at the layman makes such a difference: Carl writes in a clear and concise manner, setting out even the most complex tax jargon and regulations into short easily digestible chunks, with copious worked examples which really help understanding.
The books covers just about anything a landlord needs to know about property, income, stamp duty, incorporation, VAT, capital gains and inheritance tax etc, including these contents:
Scope of this Guide
Chapter 1 – What is Property Tax?
Knowing Your Enemy
What Taxes Face a Property Investor?
Which Taxes Are Most Important?
The Impact of Brexit
Chapter 2 – What Kind of Property Investor Are You?
Chapter 3 – How to Save Income Tax
Chapter 4 – Saving Income Tax on a Property Investment Business
Chapter 5 – How to Save Tax on a Property Trade
Chapter 6 – How to Save Capital Gains Tax
Chapter 7 – Other Taxes to Watch Out For
Chapter 8 – Advanced Tax Planning
Chapter 9 – Planning With More Complex Structures
From some basic tax saving principles, the guide progresses through the practicalities of what landlords need to know on each aspect of property tax, and perhaps more important, what they need to do now, to ensure they have the right documentary evidence in place for the future.
With lots of worked examples, brief case references, and useful links to other information sources throughout, I found this highly comprehensive 300 page guide easy to read and understand without overcomplicating what is a highly complex subject.
If you want to make sure you tackle your property accounts in a way that will enable you to reduce the amount of tax you pay long-term, then I recommend this book for your bookshelf.