There are many factors that get overlooked when understanding how to navigate yourself as a landlord, the most difficult of which I believe to be, is how to have tax efficiency – so let’s change that.
First we must look at how to create tax efficiency, so what are our options? Our most highly recommended ideas that get most overwhelmingly overlooked are:
- Tax bands not being taken advantage of. Capital Gains Tax is usually not paid when assets are transferred between spouses, this essentially allows you as a landlord to cut your tax bill by simply just transferring your assets to your partner, so what’s stopping you?
- Have you considered creating a limited company? While, yes, it requires amounts of planning but let’s look at the benefits. Not only can having a limited company help to reduce taxes as an existing landlord, it also allows you to buy a property through you’re new business, this means that you’ll become enabled to offset costs against profits; as well as being able to employ yourself, or someone else, to manage the property that’ll be held within your portfolio. The money that’s been proven to be saved under this is massive, this idea should be greatly considered.
- If you’re in a position to make full use of a Limited Liability Partnership as a professional property business, then you would be able to enjoy favourable tax laws on the treatment of capital and income.
- You must be sure to be getting the most from your properties. By consistently getting your property reassessed you’re able to keep up to date on its value; as well as being able to keep your business being viewed by outsiders. These will help you when it comes to strengthening your hand against lenders as they’ll be forced to reassess your loan value, once again giving you higher tax efficiency.
While flexibility is extremely important when looking at being a landlord, it’s vital that you find the most suitable dynamic between it and your taxes, you must be making sure you’re sacrificing the least you have to. It’s important to understand what area you’re looking to achieve flexibility in as a landlord when discussing what dynamic is most suitable to you. Is it in your relationship with your tenant? Is it in creating a relaxing life for yourself and decreasing your workload? Let’s figure it out.
- If you’re looking to be flexible with your tenant then it’s super important to focus on communication and boundaries in relation to the property, to ensure you’re both kept in the loop, helping to limit surprises.
- If you’re looking to be flexible in terms of creating a more relaxing and enjoyable life for yourself as a landlord, then I’d advise you to either invest in a property manager, or focus on creating an efficient contract between the two of you at the beginning of the tenancy, so there’ll be less needs for constant meetings between you as the agreements are already clearly laid out.
While of course landlords can have good tax efficiency and flexibility, it’s crucial that you understand the areas in which you’re looking to achieve this tax efficiency, and where you’re wanting flexibility within your life as a landlord. It’s important to note the higher your tax efficiency is, the more likely it is to impose on your own flexibility – however this is easily solvable. To avoid this dilemma you must aim to employ people who can offer you professional help, or work within the framework of your existing lifestyle.