Tax dodge of the week: beware the taxman’s crackdown
The taxman’s crackdown on landlords began in earnest last week, so it is a good idea to make sure that you are declaring and paying the correct amount of tax, says David Budworth in The Sunday Times. Fortunately, there are still plenty of legitimate ways of reducing your tax bill.
Firstly, rent is subject to income tax, so if one spouse is a basic-rate taxpayer it makes sense to have it in his or her name until you want to sell. When you do sell, you should transfer half the property back into your name so as to make use of both of your capital gains (CGT) allowances (£9,200 per person).
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If possible, you should also nominate the buy-to-let property as your principal private residence (PPR) so as to avoid CGT for the last three years of ownership. According to the Revenue’s rules, you have to live in your property for only a week for it to qualify as your PPR (accountants recommend living there for at least six months).
As for tax relief, you can offset maintenance bills, council tax, water and sewerage rates against the rent, so keep receipts. Finally, the interest you pay on your mortgage, but not the capital repayments, can also be set against your bill.
