Whether you’re thinking about buying, selling or letting a residential property, there are a few tax points you will want to consider that might influence how you structure the way you do things. Tax is a complex area and the penalties for getting it wrong can be substantial, so always take professional advice before any transaction to make sure you stay compliant and save yourself some money.

Buying a residential property

Buying a property can result in having to pay Stamp Duty Land Tax (SDLT). The current SDLT rates are:

• 0% on the first £250,000 of the purchase price
• 5% on the next £675,000 (so the portion from £250,001 to £925,000)
• 10% on the next £575,000 (so the portion from £925,001 to £1.5m)
• 12% on any of the purchase price above £1.5m

So a property bought for £300,000 would have an SDLT bill of £2,500. However, if anyone owning a share in the new property also has a share in another property there’s a 3% surcharge on the whole of the purchase price, including the part at 0%. So that SDLT bill would rise to £11,500.

There are opportunities to reclaim that surcharge or avoid having to pay it in the first place, so please speak to us about those.

Letting out a residential property

If you are buying a property to let, you need to be aware of your reporting obligations even if you’re not charging your tenant a full market rent – for example because you’re letting to a friend or family member.

If you receive property income of more than £1,000 in a tax year, it has to be declared to HMRC. This may not mean filling in a full tax return, but you are still responsible for telling them about it. Similarly, if your property income before any allowable expenses exceeds £10,000 in a tax year, you are required to fill out a self-assessment tax return for that year.

Even if you are letting out the property at a loss – for example because your tenant can’t afford to pay you the full rent or you have a high amount of expenses to pay in a particular year –  you may still benefit from reporting that loss to HMRC as you can use it against any future profits.

Failing to declare your rental income appropriately can lead to substantial penalties and interest being charged by HMRC, so if you are unsure please speak to a member of our team about your circumstances.

Keeping your tax bill down

If you are currently letting a property and declaring your rental income to HMRC, are you making best use of your available deductions and allowances?

For example, are you claiming a deduction for your mileage to and from your rental property when you visit?

Could there be a tax benefit to putting your property in joint names, where other members of your family or household are subject to a lower tax rate?

If being a landlord is your full-time job, might you be able to save some tax by running your business through a limited company?

Speak to one of our team of tax specialists to make sure you are maximizing your tax savings

Selling your residential property

Sales of residential property which generate a Capital Gains Tax liability must be reported to HMRC and any tax paid within 60 days of the completion date.

Calculating a capital gain can be highly technical, particularly where the property has been your main residence for some or all of your period of ownership.

Could you reduce or eliminate your tax liability by transferring part of the property to a spouse or civil partner prior to the sale?

What expenses can you claim in order to reduce your gain, such as enhancements/improvements to the property?

If you’re selling at a loss, you may need to report the sale to HMRC in order to ensure you can use that loss against future capital gains.

If you’re downsizing, do you understand the potential Inheritance Tax reliefs that might be available on your new home when you die?

Speak to our tax team to ensure you’re not paying more tax than you have to.

We are always happy to have an initial no-obligation chat with you about our services, so please do not hesitate to contact a member of our experienced tax team if you wish to discuss your property tax matters further.