Spotlight Accounting Services for Landlords
We provide a vast range of landlord accounting services to those in the Shropshire area and beyond, and work with individuals that have a second property right through to those with large property portfolios that are run as a business. This applies to properties held individually and in a SPV (Special Purpose Vehicle). Based in Shropshire, we are here to help and assist on all landlord tax and accounting requirements, no matter how many properties you may have in your investment portfolio.
At Spotlight Accounting our services include:
- Preparation of property accounts
- Personal tax returns including calculation of income tax
- Capital gains tax including residential capital gains tax returns
- Preparation of Limited Company and SPV accounts
- Property tax advice and planning
- Pension scheme accounts
- VAT returns
What is a landlord?
A landlord is the owner of a property that is rented or leased to an individual or business. In most cases a landlord is an individual that holds more than one property, but a landlord can be a limited company, a pension scheme or a partnership. Landlords can hold residential property, commercial property and land that is all rented.
The common denominator for all landlords is that they have invested in property with a view to receive rental income. Even if an individual rents out their main residence they are still classified as a landlord.
What is a landlord accountant?
In most cases, a landlord accountant will prepare annual property accounts, submit the relevant landlord tax returns and calculate the taxable income and the tax liability due.
A good firm of landlord accountants will work with the landlord directly, looking at the existing property investment portfolio and long term aspirations of the property owners to ensure that the property investment portfolio is in the most tax efficient structure.
Where it is not working effectively, then a good landlord accountant should offer advice and options on how to move to the most tax efficient structure.
Why does a landlord need an accountant?
Whilst a landlord can prepare their own property accounts and submit their tax returns to HMRC, the HMRC rules surrounding property tax are complicated. Using a firm of specialist property accountants, such as Spotlight, ultimately reduces a landlords tax bill.
By utilising a firm of chartered accountants, not only provides a landlord with peace of mind that they are completely compliant, but they will also benefit from years of experience and expert advice.
So not only are they paying the correct tax liability, but they can relax, safe in the knowledge that all relevant claims have been made and their property business is operating tax efficiently.
Many landlords find dealing with property accounts and tax time consuming, so by using a professional accounting service from a firm of accountants for landlords can save them valuable time. It can also protect and prevent them from running into any tax problems further down the line.
What taxes does a landlord pay?
If the landlord is an individual then they will pay income tax through their self assessment tax return. The rate at which tax is paid depends on a number of factors including other income and if the rental property has a mortgage on it.
Limited companies that hold buy to let property must pay corporation tax. There are special rules regarding what is classified as a business expense where properties are held in a company.
If a landlord holds commercial property or has a residential property as a furnished holiday let, then they may have to register for VAT. We always recommend taking VAT advice to ensure that you are trading in the most tax efficient way.
When a landlord purchases a property they will have to pay stamp duty land tax and when they selling property there could be capital gains tax to pay.
If property is held in a pension scheme, then there will be no tax to pay on the income but they could have to account for VAT.
Property tax can be extremely complex, which is why we always recommend using the services of a chartered accountant.
What tax relief and expenses can landlords claim?
In general, landlords can claim direct costs that directly relate to the rental business. These can include letting agents fees, repairs, insurance, travel, replacements of some domestic items, and accountancy fees.
Landlords need to be careful when claiming for repairs, as expenditure that could be classed as an improvement is not an allowable expense.
Mortgage interest and finance costs have separate rules for tax relief and is given at 20% rather than at the rate the property income is taxed at. That is unless it is a furnished holiday let, a commercial property or property held in a company.
There are different rules for furnished holiday lettings, so we recommend contacting Spotlight Accounting for comprehensive advice.
What is the tax on a buy to let property?
The tax paid depends on the ownership of the buy to let property.
If an individual owns the property, then the landlord will pay tax through self assessment. The rate of tax paid will depend on the profits of the portfolio and other income.
As HMRC class property income as investment income – this will be the last income that tax rates are applied to, so if your other income takes you into the higher rate (currently 40%) tax band then you will pay 40% tax on your property profits. Unless your property is commercial or a furnished holiday let any mortgage interest or finance costs are not part of your property profits these are dealt with separately as a tax credit at 20%, providing there is enough rental income to offset it.
If a Limited company (sometimes referred to as a SPV) owns the property, the landlord will pay corporation tax on the taxable income which at the current rate of tax is 19%.
Property tax can be quite complex, therefore we always recommend taking tax advice to ensure landlords understand their tax position and tax obligations based on their personal circumstances.
Who is responsible for accidental damage to rental property?
The responsibility for accidental damage depends who caused the damage.
If a tenant causes the damage then it is their responsibility to make the repair. If they don’t make the repair then this can be reclaimed from their deposit. If the accidental damage was not the tenants fault then it is the landlords responsibility to make the repair.
So, for example, if a tenant’s accidentally drops a cup and damages the kitchen tap then it is the tenants responsibility to make the repair, but if the tap leaked due to general wear and tear, then it is the landlords responsibility to replace the tap.
Where a landlord pays for a repair this is a tax deductible expense. This is why many landlords use a letting agency as they are extremely knowledgeable in these matters and ensure smooth running of property portfolios for buy to let landlords.
Why choose Spotlight Accounting?
At Spotlight Accounting, not only are we experienced landlords ourselves, but we are also a firm of chartered accountants which means we have to keep up to date with the latest legislation. We are a small friendly team that work with our clients as their business grows.
We take the time to understand our clients circumstances and provide a range of tax and accounting services suitable to their needs.
Every client is offered Hammock as part of our services. Hammock is a cloud-based solution that manages property accounts and can automate a lot of time consuming tasks whilst giving financial visibility of the investment portfolio.
Our comprehensive range of services ensure that we can support our clients business. With making tax digital coming in from April 2024, we are already looking at solutions (such as Hammock) for our clients, so that quarterly submissions to HMRC can be made in a timely manner.
Choosing an accountant can be hard as there are many landlord accountants out there. But at Spotlight, we firmly believe that by bringing our personal experience and expertise to our tax and accounting service makes us the right choice for any property investor.
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Frequently Asked Landlord Accounting Questions
Can landlords still claim 10% wear and tear?
In short no, landlords can’t claim 10% wear and tear as this was abolished in 2016 and only applied to furnished lettings. Under the new rules landlords can claim for the cost of replacing any furniture, furnishings, appliances and kitchenware.
Is a landlord classed as a sole trader?
Property income is classed as investment income, whereas a sole trader relates to an individual’s trading income even if the portfolio is running as a business.
So whilst both rental income and trading income are both entered onto an individuals tax return, rental income does not attract national insurance.
