Maintaining property Instead of paying tax...

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

    Maintaining property Instead of paying tax...

    Hi folks.

    If I work out that this tax year I will have to pay for example £1000 tax on a rental...is it more beneficial to spend 1000 on Maintaining it like having a bit of painting done or a gardener? So effectively I'd be spending the same
    money but it would be benefiting me and the tenants instead??

    hope this makes sense!

    #2
    Actually the annual rental profit say £5000 ( e.g 12 months rent say £6000 minus allowable expenses say £1000 for letting agent and insurance ) is charged at 20% or 40% rate depending on your job income = £1000 or £2000 tax bill.

    So if you were to spend all £5000 rental profit on maintenance work e.g . internal re-decoration and replace the rotten window frames , you would have no £1000 tax bill to pay but you also lose the £3000 or £4000 after profit and the Tax office also loses £1000 in tax revenue.

    So you would get the benefit of £5000 worth of maintenance work for only £4000 or £3000 actual cost to you.

    Comment


      #3
      So I guess I'm right then. Instead of spending 5000 tho I would only spend 1000 then i wouldn't be 4000 out of pocket!

      Comment


        #4
        if you spend 1000 on maintenance, purely to avoid tax, then yes you could save but you also lose the benefit of the money to yourself to spend on whatever you want to improve your own quality of life, surely that's the basic principle of being in business, to improve the quality of your personal life and not to see how much tax you can avoid paying?

        Comment


          #5
          Originally posted by MisterB View Post
          if you spend 1000 on maintenance, purely to avoid tax, then yes you could save but you also lose the benefit of the money to yourself to spend on whatever you want to improve your own quality of life, surely that's the basic principle of being in business, to improve the quality of your personal life and not to see how much tax you can avoid paying?
          Exactly! The phrase "tail wagging the dog" springs to mind. OP, if you want to save tax that badly I recommend that you halve the rent you charge your tenants. That's guaranteed to dramatically reduce your tax liability!

          Comment


            #6
            It's not really trying to avoid paying the tax. It's more if I have to pay that tax anyway I might as well spend it on the rental. Seems a no brainer to me. Why give the govt more. I give them enough in my normal job!

            Comment


              #7
              Unless your tax rate is 100%, you would have to spend the entire income (less any other allowable expenses) on maintenance to avoid paying tax.

              Which is reasonable sensible from a tax point of view, but does make the actual investment a bit pointless.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Ok. Let me ask another way. My rental gets me 10000 per year. Tax is 20% which makes 2000 so I have to pay 2000 quid. If I have 2000 allowable expenses do i still pay 2000?

                Comment


                  #9
                  If you had 2000 allowable expenses you would have still made 8000 profit and will pay 1600 tax (at a guess).

                  Comment


                    #10
                    or in your normal job, you get offered a pay rise, but you don't take it because you would have to pay tax on it. so you would rather not have the additional pay?

                    if you invest in your property by 1000 and the property value rise, when you come to sell you will pay additional tax (CGT) on the amount the property has risen in value since purchase. how much would you expect the property to rise in value for an investment of 1000 per year over ten, twenty years because that profit is taxable. or would you be happy to see no increase in value as your sole intent is to avoid paying tax? so over twenty years, you have avoided paying tax on £20000 but you have also 'lost' the opportunity to enjoy the £16000 you could have put in your back pocket.

                    if I was looking for ways to become more tax efficient, I would be loading up my (or partners) pension scheme with as much (pre tax contributions) that I could rather than new wallpaper on a rented property.

                    Comment

                    Latest Activity

                    Collapse

                    • Moving into my Buy to Let
                      Veryvicky79
                      I’m considering selling my primary residence and moving into my buy to let. I then will want to sell the buy to let in a couple of years time and then buy a new primary residence outright. Reason for this is to consolidate my assets and buy my next family home outright.
                      My question is will...
                      22-04-2019, 17:23 PM
                    • Reply to Moving into my Buy to Let
                      Gordon999
                      The gain achieved during "primary residence period" is exempt for cgt. .

                      The gain achieved during the BTL period is liable to cgt at 18% or 28%

                      Primary residence can be claimed for the period in residence plus up to 9 months after moving out
                      24-04-2019, 01:39 AM
                    • Reply to Moving into my Buy to Let
                      buzzard1994
                      By taking full advantage of the tax relief for private residences and selling before they need to pay tax. You used to be able to designate whichever property you wanted as your main residence. The last 18 months of occupation is currently tax free - that is dropping to 9 months in 2020. It used to...
                      23-04-2019, 21:49 PM
                    • tax responsibility and allowable expenses
                      pineapple11
                      Hello, wondering if anyone can help.

                      Firstly, my husband and I are joint owners of our rental property but I heard that we can change things so the tax is based on my income alone. Is this true? If so how can I go about arranging this. I earn alot less than my husband.

                      Secondly,...
                      23-04-2019, 20:58 PM
                    • Reply to Moving into my Buy to Let
                      jpkeates
                      They don't actually avoid it, they do what anyone can do if they live in more than one place.
                      You can nominate one of them to HMRC as your primary residence - because you're only allowed one property as your "primary" residence.

                      While that costs you CGT on the other one,...
                      23-04-2019, 11:54 AM
                    • Reply to Moving into my Buy to Let
                      flexy
                      How do politicians get away with paying no CGT on their second residences?
                      23-04-2019, 10:04 AM
                    • Reply to Moving into my Buy to Let
                      loanarranger
                      jpkeates is correct however your lender might give consent to you occupying the property but place a bar on any release of equity from the property until either you have vacated the property again and can demonstrate this having been done or you have sold the property: much will depend on who your Buy...
                      23-04-2019, 08:53 AM
                    • Reply to Moving into my Buy to Let
                      jpkeates
                      The CGT is adjusted to allow for the period of residence (under current rules at least).

                      Do you have a mortgage on the BTL property, because that would not allow you to live their without breaking the terms of the loan?
                      23-04-2019, 08:43 AM
                    • Reply to Moving into my Buy to Let
                      theartfullodger
                      Do you know what CGT rules will be when you sell?
                      22-04-2019, 19:52 PM
                    • Reply to Moving into my Buy to Let
                      JK0
                      Yeah, for the gains for the time it was a rental.

                      You might also want to look into stamp duty.
                      22-04-2019, 19:38 PM
                    Working...
                    X