Pre 5 April planning for residential landlords

With the end of the financial year approaching, now is a good time for residential landlords to review their tax affairs.

You should be considering the following areas:

Refurbishments: If you are bringing forward planned refurbishment costs, you can obtain tax relief in in the 2021/22 tax year.

Dividend Tax Rates: With the rate of tax due on dividends set to rise by 1.25% from 6 April 2022, it may be a good idea for those landlords who hold property portfolios in a company to consider withdrawing dividends before the rates are set to rise.

Furnished holiday let (FHL): A property qualifying as a furnished holiday let can benefit from various tax reliefs which are generally not available to property rental businesses, such as:

• Interest on loan can be deducted in full
• Income from FHLs qualifies as earnings for pension purposes.
• Relief is available for capital expenditure in respect of furniture, fixtures and equipment.
• Various capital gain tax reliefs are available on disposals of FHLs.

The ability for some properties to qualify for this relief has been adversely impacted by the COVID-19 pandemic, and landlords might want to review the status of their properties prior to the end of the tax year to see if there are any reasonable steps they can take to ensure that their properties do not lose FHL status for the 2021/22 tax year.

Pension Contributions - Making pension contributions can be an effective pre-year end planning tool to decrease the years income tax payable. For some, they are also able to recoup their personal allowance, giving relief up to 60%.

How can we help? 

We can also help landlords with a review of the tax efficiency of their affairs, including the following:

• reviewing the ownership of landlord’s property portfolios to ensure that they are tax efficient
• helping landlords who wish to pass wealth or income to family members to do so in an efficient way
• helping those landlords who are affected by the loan interest restriction rules structure their affairs more efficiently
• helping review the remuneration policies and general affairs of those landlords with property investment companies.

As we continue to deal with the ongoing COVID-19 pandemic, it is more important than ever that landlords structure their affairs in a way that works for them.  

At Crowe, can help you with all aspects of property taxation, and ensuring your affairs are structured to ensure you get the most out of your property portfolio.