Investment Property Accountants - WARR & CO

Investment Property Accountants

Plug The Leaks - Vital Tax Efficiencies

Whilst is often said that you should ‘not let the tax tail wag the dog’, nonetheless the tax implications should always be a vital consideration of any proposed investment, including property.

Part of the attraction of property as an asset class is that there is a dual opportunity for return; the prospect of capital appreciation and ongoing income in the form of rental yield. When searching for a property in which to invest, the numbers are crunched and a determination is made with regards to the suitability or otherwise of adding it to your portfolio. Whilst actual returns from capital growth and rental streams may be swayed from initial expectations by any number of variables, tax liabilities, on which you have some degree of control, can have a significant detrimental impact upon overall returns.

Giving consideration to some simple guidelines can avoid unnecessary erosion of the overall return enjoyed on an investment. Afterall, the aim of property investment is to make personal profit, not to inflate the bank balance of HMRC.

Think Tax

Don’t base your decision solely on the tax implications but at the very least you should be influenced by them. In simple terms, be aware of them.

Keep Receipts / Keep Records

Don’t throw anything away. As detailed in our previous article, Property Investment – A Taxing Thought, whether it is in regards to the ongoing rental profits or you are considering selling the property, there are many different expenses that may be incurred which may be deductible.

Live In A Property You Rent / Rent A Property In Which You Have Lived

Give careful consideration to the election of a property for purposes of private residence relief and remember letting relief. These can give rise to significant savings. Please take a look at our recent articles on Private Residence Relief and Letting Relief.

Use Your Capital Gains Tax (CGT) Allowance

When disposing of a number of properties, where possible endeavour to do so across different tax years. This enables the annual CGT allowance of £9,600 to be utilised in each year. This alone can save £1,728 (£9,600 x 18%) of CGT.

Use Another CGT Allowance

Prior to disposing of a property that may be in single ownership, transferring it into joint ownership with a spouse or civil partner gives rise to the use of two annual CGT allowances rather than one.

Consider A Different Way of Buying

Rather than purchase property personally, alternative options such as via a Limited Company or, where commercial property is being considered, by utilising self-investment via a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) may be considerations. We shall take the opportunity of covering each of these options and their respective implications in more detail in specific articles in the very near future. Suffice to say each client should weigh these up based upon their specific circumstances and objectives. We would be delighted to discuss these with you.

These are some basic rules but nonetheless important ones that, if considered, will avoid your portfolio leaking profit. Feel free to contact us should you wish to discuss these issues.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Date of Article: 19th November 2008

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This domain is owned by Warr & Co Chartered Accountants which is a member of the Institute of Chartered Accountants in England & Wales (ICAEW). Whilst the information detailed here is updated regularly to ensure it remains factually correct, it does not in any way constitute specific advice and no responsibility shall be accepted for any actions taken directly as a consequence of reading it. If you would like to discuss any of the points raised and / or engage our services in providing advice specific to your personal circumstances, please feel free to contact Peter Edwards on 0161 477 6789 or email us at