How much extra tax do Property Investors pay? Reply

Recent tax changes such as Clause 24 Interest Restrictions, 3% extra SDLT and 8% extra Capital Gains Tax have hit landlords hard and these NLA videos explain the full impact

The NLA predict that the changes will mean that 20% of Landlords will sell their portfolios.

Since September lenders to Portfolio Landlords have been required to look at the whole portfolio before lending and this has lead to 70% of landlords with four or more properties saying that they have found it hard to obtain finance.

Overall Residential transactions have seen a slight decline in activity

Since 2015 more and more landlords have been using Limited Companies to purchase property investments even though mortgage interest rates are a around 1% higher there are many advantages:

  • Clause 24 Interest Rate Restrictions don’t apply to companies
  • Lenders can take a specific change and a debenture over a company and this is why separate companies for each investment can be an advantage
  • If you sell the company shares rather than the property the buyer will pay 0.5% SDLT on the shares, the capital gains tax on shares is 8% lower than on residential property and the potentially the company purchaser can takeover the existing debt without needing to refinance
  • Corporation Tax is 19% where as Landlords pay Income Tax rates, which means companies can help you to build a portfolio quicker as you retain more profit



Do you try to buy from local and UK suppliers? Reply

We are rapidly approaching BREXIT in March 2019 and its highly likely to cause currency fluctuations, that alone has to be a good reason to source products and services locally.

There are of course many other reasons such as:

  • Consumers are often prepared to pay for more locally sourced products
  • Its better for planet – why ship things hundreds of miles and pollute the planet if you can buy locally
  • It protects local jobs and services and helps the economy to grow

The Chartered Institute of Procurement and Supply reported

EU businesses say goodbye to UK suppliers as Brexit bites into key relationships
06 November 2017

Nearly two-thirds (63%) of EU businesses expect to move their supply chain out of the UK
Two-fifths (40%) of UK businesses are looking to replace their EU suppliers
25% of large UK businesses* have spent over £100,000 preparing their supply chains for Brexit
Nearly two-thirds (63%) of EU businesses who work with UK suppliers expect to move some of their supply chain out of the UK as a result of Brexit according to a survey from the Chartered Institute of Procurement & Supply (CIPS). This is a dramatic shift from May, when just 44% of EU businesses were expecting to move out of the UK.

So unless we start to support Local and UK businesses there could be significant consequence for the UK economy.



What if you don’t get your self assessment done in time? Reply

What if you don’t have all the information you need for the return?

Returns which include provisional or estimated figures should be accepted provided they can be regarded as satisfying the filing requirement.

A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure

An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost. The taxpayer is not required to tick box 20 of the Finishing your Tax Return section of the return page TR 6 (or equivalent in a return for an earlier year) where estimated figures have been used

HMRC SAM121190

Is there a reasonable excuse as to why you can’t file the return?

A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

1. your partner or another close relative died shortly before the tax return or payment deadline
2. you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
3. you had a serious or life-threatening illness
4. your computer or software failed just before or while you were preparing your online return
5. service issues with HM Revenue and Customs (HMRC) online services
6. a fire, flood or theft prevented you from completing your tax return
7. postal delays that you couldn’t have predicted
8. delays related to a disability you have

What if you make a mistake?

If you make a mistake on your tax return, you’ve normally got 12 months from 31 January after the end of the tax year to correct or amend it.

White Space

The Self Assessment Return contain additional information boxes, these are known as white space, use these spaces to explain your calculations if you have any doubt about the answers you have given

Penalties for Late Filing

  • 1st Feb 2018 – £100 for missing the deadline
  • 30th April 2018 – £10 per day for 90 days after your are 3 months late (£900 in total)
  • 31st July 2018 – 5% or £300 which is ever is greater if you are 12 months late
  • 31st Jan 2019 – £300 or possibly 100% of tax due if deliberate

On top of these penalties there are also penalties for non payment

Why do we leave Self Assessment Returns until the last minute? Reply

It seems to me that there are basically two types of taxpayer and the split is pretty even.

The first type are ‘Organised Planners’, they prepare things as early as possible, work out what tax might be due and how they will pay it, look at ways to change things and file early. They will always pay less tax because they have had a chance to consider their options – Pensions, Gift Aid, SEIS, EIS and other things that reduce tax – they also tend to have a full set of records neatly posted on their accounting system.

The second type are ‘Just in Time’, whatever the deadline, they put things off. The problem with this is that often this means things get forgotten and paperwork gets lost, there is no time to prepare or plan and the tax will be payable immediately.

The added problem this year is that Credit Card Payments are no longer an option

In 2016, personal credit card payments for tax numbered 454,000 making of total of £741 million and resulting in £3.2 million in bank fees.

These payments were largely made by small businesses, looking to manage bulk payments by putting them on a credit card that could then be paid off over time.

Below are some statistics from HMRC from 2012, but I think that little has changed and the statistics will be similar this year.

I don’t think anyone would say they enjoy paying tax or filling in forms, so in some ways you can understand why some people put it off and do it ‘just in time’.

Last year HMRC reported

29 January was the busiest day with 513,271 returns completed – that’s more than 21,386 returns received per hour. The busiest time was between 14:00 and 15:00, with 50,358 customers – 14 per second – clicking submit.

If you haven’t done your return, do it now, don’t wait till 11.59 on 31st January.


Can I claim mortgage fees against property profits and reduce my tax? Reply

Yes you can! if you are property investor you can offset mortgage fees

The rules are in Income Tax (Trading and Other Income) Act 2005

Section 58

Incidental costs of obtaining finance
(1)In calculating the profits of a trade, a deduction is allowed for incidental costs of obtaining finance by means of—
(a)a loan, or
(b)the issue of loan stock,
if the interest on the loan or stock is deductible in calculating the profits of the trade.
(2)“Incidental costs of obtaining finance” means expenses—
(a)which are incurred on fees, commissions, advertising, printing and other incidental matters, and
(b)which are incurred wholly and exclusively for the purpose of obtaining the finance, providing security for it or repaying it.
(3)Expenses incurred wholly and exclusively for the purpose of—
(a)obtaining finance, or
(b)providing security for it,
are incidental costs of obtaining the finance even if it is not in fact obtained.
(4)But the following are not incidental costs of obtaining finance—
(a)sums paid because of losses resulting from movements in the rate of exchange between different currencies,
(b)sums paid for the purpose of protecting against such losses,
(c)the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or having been obtained or issued at a discount, and
(d)stamp duty.
(5)This section needs to be read with section 59 (which provides for restrictions in relation to convertible loans and loan stock etc.).


Can I hold shares as a nominee for someone else? Reply

It is acceptable for a shareholder to nominate someone else to hold their shares, if the company’s articles allow it (Section 145 Companies Act 2006). Therefore, a shareholder could nominate someone to attend and vote at meetings in their place, or they could nominate a relative to receive their dividends if they wish. However, the nomination rights are restricted, in that shareholders cannot delegate the power to enforce any of their rights against the company or to transfer their shares.

In these situations, the share’s legal interest is held by the nominee, while its beneficial interest is held by the investor.

There would normally be a Declaration of Trust between the Nominee and the Owner.

The ‘legal owner’ is shown as the nominee on the register of shareholders, attends shareholders meetings and votes, the ‘beneficial owner’ is hidden provided they don’t own more than 25% or have significant control over the board, otherwise they would need to have their details disclosed on the PSC register.

Nominee shareholders can be useful for investors who want professionals to manage their investment, they can then delegate authority to the Nominee to make decisions on their behalf.

The Beneficial Owner will be taxed in the normal way on dividends and capital gains.