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Im an accountant who deals with a lot of individuals who are investing in BTL and those who have a property portfolio. Dealing with the tax compliance and advice. If anyone would like any advice please do not hesitate to contact me.

I have been gifted a monthly amount of money from my dad for the last few years and it qualifies under 'normal expenditure out of income' (section 21 of the Inheritance Tax Act 1984). I was just wondering if I am able to boost my salary by adding this monthly gift to it? and in turn apply for a larger mortgage? for example; I have been gifted £500 per month, for the last 7 years from my dad ('normal expenditure out of income'). Can I add this to my main salary of £2500, to boost my salary to £3000 and receive a larger mortgage? Cheers

My mother-in-law wants to gift her residential property to my partner and I, but remain living in it. The house is worth about 180k with a mortgage of about 30k. Our plan was to apply for a BtL and release the equity, gifting some back to her to enjoy, but ensuring she pays rent. I believe there are some caveats on BtL to family which would need to be considered. Are there any tax implications in gifting? My thoughts after some research were: - no IHT if she lives for >7y - no capital gains for her because it is a residential property, though we would be liable if we later sold - we would be liable for SDLT on the mortgage owed - ??income tax implications with gifts Any advice would be appreciated!

Hi all, I hope you are all well. i have a few questions about investing in my fiancé’s BTL property. My partner and I are looking to add myself to the deeds of the property and pay off 75% of the current mortgage, which is in her name. I will then collect the rental income in my name, pay the relevant tax and pay my Fiancé a percentage that reflects the percentage she has in the property. Current situation we both pay the higher rate of tax and are in the process of buying a main residence together. I own 2 other btls. questions are there any tax implications on being added to the deeds? Are we obliged to tell the mortgage provider (the mortgage is on my fiancé’s name) that someone else has been added to the deeds? I assume so!? how much does this cost? This situation is being looked at as an alternative to buying another property and avoiding stamp and fees on a new property. many thanks!

Louise and her team of property tax specialists have been speaking with a number of clients that are concerned about income tax, given the budget changes, and how they should structure their property business within a family. There are a number of concerns that people ought to be aware of: - Are you keeping your fair share of earned income or is HMRC taking more than what seems reasonable? - Are you protecting your hard earned wealth for future generations, or are your assets under threat from HMRC’s Inheritance Tax or family mis-use? - Are you getting the best returns from your investments and assets, or are your investment managers getting a better deal? - Do you know how your pensions are performing, and are you pleased with it or could it be better? There are many examples I've been told where buy-to-let landlords build wealth with a clear expectation of how they want this passed through generations of family, but due to lack of wealth management, the wrong people receive the money and assets. And if a property investor hasn't drawn up a Will before their death, the Crown receives ALL of the assets. It's also worth remembering that when you die, you could be leaving loved ones to deal with the fact that the estate is subject to HMRC’s 40% Inheritance Tax. Wealth management and tax planning are so vital. I hope this article provides some thought of how you structure your property business going forwards url: http://www.optimiseaccountants.co.uk/wealth-management-tax-planning-for-property-investors/#.WYlwQtMrKRs

Do you own assets that will eventually be passed on to your children? Are you worried about inheritance tax? The problem — capital gains tax (CGT) & inheritance tax (IHT) Many parents throughout the UK wish to transfer assets to their children now to avoid inheritance tax (IHT) in the future and we receive many calls from clients and non-clients who have heard about lifetime transfers. Basically, if you transfer assets up to the IHT threshold and survive for seven years after the transfer, then that transfer will not form part of the IHT liability upon your passing. Unfortunately, however, parents still have to pay capital gains tax (CGT) on any transfers made between them and their children, even if the transfer is a gift. HMRC deems that any gifts of assets are liable for CGT at market value. If an asset is valued at £100,000 and is given to a child for no consideration, then the £100,000 is what is used to determine the CGT liability. This causes people a huge headache as they know that their assets may be subject to IHT if they do not act quickly, but even if they do, their assets are subject to CGT. Can you relate to the above? A real life client example — John passing assets to his son James For the purpose of this article we are going to name my client John to protect his identity. John has £1.5m of assets, of which £1m is in residential properties and £500K is the net asset value of his trading business. He wishes to set up his son James (20) in business to give him a head start in life as university is not on the agenda for him. John thinks about transferring all of the residential properties and the business to his son so that he can leave the UK for a sunnier climate. John knows that making such transfers will help him mitigate IHT if he survives for seven years afterwards. At the time of writing the transfer limit was £325,000 and the IHT threshold upon death is also £325,000. This means that James would have to pay 40% tax on any excess over £750,000. Ultimately this would mean selling off some assets. Transfers to mitigate CGT and IHT As we have identified, there are £500,000 nets assets in his business. John can transfer the business to his son and claim gift relief, meaning that John does not pay CGT but his son will have a deemed cost of £0. This means that James will have to pay more CGT in the future — he will pay CGT not only on the increase in value of the business during the time he has owned it, but also the deferred amount due when it was gifted to him. An example of how gift relief works was included in this article. When it comes to the residential properties, John considers a transfer up to the lifetime transfer value of £325,000, half of the residential property value, but then realises he would have to pay CGT upon such a transfer. Remember, however, that John has an annual capital gains exemption of £11,100, which means that any gain below this amount would be CGT-free. John could therefore consider transferring one or two properties to his son per year to take advantage of this allowance. Practical steps you should now take to mitigate IHT and CGT It is one thing to understand the theory but it is another to put it into practice. This is why I have written a step-by-step guide to implementing this strategy: Identify the nets asset value of your trading business assets and transfer those using gift rollover relief Transfer assets over time that are not trading assets to utilise your capital gains exemption

Do you own assets that will eventually be passed on to your children? Are you worried about inheritance tax? The problem — capital gains tax (CGT) & inheritance tax (IHT)Many parents throughout the UK wish to transfer assets to their children now to avoid inheritance tax (IHT) in the future and we receive many calls from clients and non-clients who have heard about lifetime transfers. Basically, if you transfer assets up to the IHT threshold and survive for seven years after the transfer, then that transfer will not form part of the IHT liability upon your passing. Unfortunately, however, parents still have to pay capital gains tax (CGT) on any transfers made between them and their children, even if the transfer is a gift. HMRC deems that any gifts of assets are liable for CGT at market value. If an asset is valued at £100,000 and is given to a child for no consideration, then the £100,000 is what is used to determine the CGT liability. This causes people a huge headache as they know that their assets may be subject to IHT if they do not act quickly, but even if they do, their assets are subject to CGT. Can you relate to the above? A real life client example — John passing assets to his son JamesFor the purpose of this article we are going to name my client John to protect his identity. John has £1.5m of assets, of which £1m is in residential properties and £500K is the net asset value of his trading business. He wishes to set up his son James (20) in business to give him a head start in life as university is not on the agenda for him. John thinks about transferring all of the residential properties and the business to his son so that he can leave the UK for a sunnier climate. John knows that making such transfers will help him mitigate IHT if he survives for seven years afterwards. At the time of writing the transfer limit was £325,000 and the IHT threshold upon death is also £325,000. This means that James would have to pay 40% tax on any excess over £750,000. Ultimately this would mean selling off some assets. Transfers to mitigate CGT and IHTAs we have identified, there are £500,000 nets assets in his business. John can transfer the business to his son and claim gift relief, meaning that John does not pay CGT but his son will have a deemed cost of £0. This means that James will have to pay more CGT in the future — he will pay CGT not only on the increase in value of the business during the time he has owned it, but also the deferred amount due when it was gifted to him. An example of how gift relief works was included in this article. When it comes to the residential properties, John considers a transfer up to the lifetime transfer value of £325,000, half of the residential property value, but then realises he would have to pay CGT upon such a transfer. Remember, however, that John has an annual capital gains exemption of £11,100, which means that any gain below this amount would be CGT-free. John could therefore consider transferring one or two properties to his son per year to take advantage of this allowance. Practical steps you should now take to mitigate IHT and CGTIt is one thing to understand the theory but it is another to put it into practice. This is why I have written a step-by-step guide to implementing this strategy: Identify the nets asset value of your trading business assets and transfer those using gift rollover relief Transfer assets over time that are not trading assets to utilise your capital gains exemption

The budget announcement changed an awful lot In previous years you could offset all of the mortgage interest you paid against your property income. If your property was furnished then you were also allowed a 10% wear and tear allowance. Both of these things helped to reduce your tax bill. But the world has changed since the most recent budget announcements, which I covered extensively in my previous article. Now you will not be able to offset all of your mortgage interest costs if you are a higher rate taxpayer, or even if your rental income before deducting mortgage interest costs pushes you from being a basic rate taxpayer into being a higher rate taxpayer. By 2020 a higher rate taxpayer will only get 20% tax relief against their mortgage interest costs, compared to 40% pre-April 2017. This effectively means that you will only be able to offset half the amount of the mortgage interest incurred against your property business. There has also been a significant increase in the amount of SDLT payable on new purchases, which I’ve also covered in a previous article. As you can see it is becoming even more difficult to invest in property while also being tax-efficient. It is therefore extremely important that you know exactly what costs are allowable… Allowable costs you can offset against your rental income The following types of costs may be offset against your property income to help you reduce your tax. This list is not complete but it gives you an idea of what costs may be allowable. Buying a property Repairs: exterior and interior painting, damp treatment, stone cleaning, roof repairs, furniture repairs Mortgage arrangement costs Legal fees associated with the loan, so legal fees related to mortgage financing of the property Other costs that you incur when buying a property such as conveyancing fees for the purchase, finder’s fees, the actual purchase of the property, stamp duty and surveys are capital costs. You can’t offset capital costs against your annual rental accounts, but you can offset them against any capital gain when you eventually come to sell the property. Refurbishment of the property One of the strategies that I’ve talked about in a previous article is still very much relevant today. By using this strategy you not only minimise your property profits but you could build up losses for the future. This means that you will not pay tax on your property profits in the future as long as those losses exist. The types of costs that may be offset against your income here are: Repairs: When carrying out repairs to broken units, roof tiles, furniture, plasterwork Renewals: Such as repainting your property, cleaning costs Replacement: For example, kitchen units, bathroom units, heating systems (boilers and radiators), lighting systems (including fuse boxes), carpets, curtains, fridges, freezers, TVs, beds, furniture (if all were in place at the time of purchase) HMRC had previously stopped people from claiming soft furnishings and freestanding units because it allowed the 10% wear and tear allowance, but since it has removed this allowance, if, for example, carpets and curtains that were already in the property need replacing then the replacement costs would be allowed. If you wanted to play it extra safe then I would suggest that you ask the sellers of any property you are buying to itemise the following on the sales documents: Value of the land and building Value of the kitchen Value of bathrooms Value of white goods (if supplied as a rental) This can then be used as evidence that there were assets in the property and will support the fact that you are replacing/repairing those assets, which means they can justifiably be offset against your tax. I would stress that you should not put in a kitchen costing £3,000 if the value in the sale documents only shows £1,000 as this will certainly be seen as an improvement and will be considered a capital expense. This works very well with properties that are in a lettable state but are very tired. As such you can justify to HMRC that the refurbishment costs will help you to increase the rental income of the property. HMRC guidance can be confusing on this issue, but on the issue of repairs it states: “If your roof is damaged and you replace the damaged area, your expenditure is allowable. “Even if the repairs are substantial, that does not of itself make them capital for tax purposes, provided the character of the asset remains unchanged. For example, if a fitted kitchen is refurbished, the type of work carried out might include the stripping out and replacement of base units, wall units, sink etc., re-tiling, work top replacement, repairs to floor coverings and associated re-plastering and re-wiring. Provided the kitchen is replaced with a similar standard kitchen then this is a repair and the expenditure is allowable. If at the same time additional cabinets are fitted, increasing the storage space, or extra equipment is installed, then this element is a capital addition and not allowable (applying whatever apportionment basis is reasonable on the facts).” Running your property business Allowable costs as part of you running your property business include: Rents and leases Business rates Council tax Water rates Ground rents Insurance Maintenance: cleaning, gardening Loan interest and finance charges (100% if you are a basic rate taxpayer but less as mentioned above for higher rate taxpayers) Legal and professional costs (removal of tenants, accountancy fees, coaching fees, etc) Utilities (if the tenants are not paying for them) Stationery Phone Travel: to the house and associated companies managing the property Hotels (if you are staying away for the purposes of your business) Subsistence (while away on business) Membership and subscriptions (property-related or management-related) Education for employees (provided that the education is enhancing your knowledge) Mileage With regard to mileage, I suggest claiming this rather than putting your car through your business as this would see you incur a benefit in kind or taxable benefit, or HMRC could claim that the car is used for personal usage and significantly limit the costs that you can offset against your property business. I have written a lot more about this subject with a spreadsheet for you to test your circumstances in another article. Next steps to implement the above It is one thing to understand the theory but it is another to put it into practice. This is why I have written a step-by-step guide to implementing this strategy: Ensure that you keep receipts for all your costs Get as much description from your tradespeople on the invoices you pay for refurbishment works. Ensure they use the words ‘repair’, ‘replace’ or ‘renew’ to ensure their work is tax-allowable Use a bookkeeping system to record your income and costs Review your numbers on a monthly basis to ensure that you are making money

Hi, I have recently purchased my second BTL property. The first was a relatively new property with a sit in tenant, so nice and easy