My blog on the 3rd July spoke about the importance of planning ahead with regards to tax with your property investments.
Well, you may think i had a sneak preview at Chancellor George Osbourne's budget because that should be front and centre of every property investor now. His announcements on mortgage interest tax relief, wear and tear allowances, CGT rates and taxation of dividends could have consequences for your return on investment.
If you are a higher rate tax payer (or hope to be in the future) then it is critical that you get expert advice on how to buy, manage, and exit your investment. With the limiting of mortgage interest tax relief to 20% by 2020 then you could find yourself paying tax even if you run a loss on your property investment. Should you buy through a limited company? Should you shift ownership onto lower rate or non tax payers? There are higher costs to buying through a limited company but these may be offset by the savings you make.
The change in taxation of dividends will also affect this decision. I have always advocated that property investment cannot be made in isolation to your other investments and that is now more pertinent than before.
To furnish or not to furnish? With the loss of the 10% wear and tear allowance we will need to monitor how much we spend on replacing furniture and whether it is more profitable to Let unfurnished. Student Lets, HMO's and some Corporate Lets will still be better as furnished but other than that i would struggle to see any advantages in a furnished let.
I still believe there are excellent returns to be made from property but it is essential to get the right advice at the right time. At Belvoir Bracknell we take the time to talk to our Landlords and find out about their personal situation. That way, when they discuss a possible addition to their portfolio, considering seliing a property or a change in their personal situation we can advise them to get the correct advice to get the structure and timing right for that decision so that their return on investment is maximised.
I have advised all my Landlords to speak to their Accountants and Financial Planners to review their current strategy in light of the tax changes mentioned in the budget. If your Lettings Agent isn't doing the same for you then you should be asking them why. If you would like a Lettings Specialist whose service consists of more than just property management then why not pop in to our office for a chat or call us on 01344 209088. We offer personal, tailored advice to all our clients from beginning to end.
