Buy-to-let landlords risk high tax bills with inadequate advice

A failure to get expert advice is causing buy-to-let landlords to risk high tax bills that may have been avoidable, say three industry experts.

Landlords are also missing out on tax reductions by not claiming for everything that is tax deductible.

In a wide-ranging discussion which is available to watch on video, the three experts stressed the need for landlords to get specialist advice from a financial, legal and tax perspective before making any big decisions. The impact of not getting a full spectrum of advice can be huge, as Herschel Santineer, tax advisor, explains.

“A client came to me to do their tax return,” he says. “He had already taken advice elsewhere and had transferred his property into a limited company. He was not at all happy to find out that this had crystallised a tax liability of £300,000. It’s so important to get the proper advice before taking any big steps.”

Ian Christlo, mortgage consultant, agrees. “Landlords have to plan for the future as well as for now. A limited company may appear to be the best way to invest in property now, but the implications for the future – particularly when exiting – have to be considered too.”

As more lenders enter the buy-to-let market, borrowers face an increasingly complex financial landscape. For example, some lenders require borrowers to use specific SIC codes (Standard Industrial Classification) so access to the best finance deals may be restricted if a different code is used. In turn, HMRC considers the SIC code when looking at how much tax to charge so there can be additional complications. It can be difficult for inexperienced landlords to successfully navigate these issues.

Harvey Harding, Managing Director of PM Property Lawyers who hosted the discussion, adds: “Many landlords didn’t set out to run a business, it’s something they just fell into. So they didn’t necessarily set things up in the proper way at the start. The best thing they can do now is to get some expert advice to find out which options are available and then make a plan for the future.”

The series of three videos are available to watch here.

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