How to own property
How you own property affects tax treatment at purchase, throughout your ownership, on disposal, and when you die – so you need to get it right
Be aware that what’s right today, may not be right tomorrow. Things change, regularly, and you need property tax experts with you, throughout your property journey
You need to know that our team of Chartered Tax Advisors specialise in property tax, it’s what we do, and it’s all we do
Depending on what you want to achieve, there are options but let’s have a look at three of the most common ones:
This is the most common way of owning UK property. It’s simple, straightforward and works for lots of people
Your properties are subject to Capital Gains Tax when you sell them, unless it’s your Principle Private Residence (your home)
Property that you own personally is subject to Inheritance Tax when you die
In recent years there’s been a shift towards buying investment property through companies, primarily driven by changes to mortgage tax relief rules
Companies can treat mortgage-interest as a cost, and Corporation Tax and Dividend Tax rates are lower than Income Tax for higher-rate taxpayers
If you invest in property via a company it will pay corporation tax on your profits. The rate is currently 19 per cent, but is set to rise to 25 per cent in 2023.
You will still be taxed if you want to access your rental income, either via Income Tax on the salary you pay yourself, or tax on Dividend payments
A property LLP can work well for families and where individuals want to group together to hold property, while sharing risk and expertise
It’s a hybrid between a company and a traditional partnership, which offers the advantage of limited liability and, like a traditional partnership, provides flexibility to share profits between partners
It’s transparent for tax purposes which means each partner pays tax on their share of the profits
More options
For professional property owners there are more options to consider
Properly structured, tax and associated planning, enabled by UK legislation, likely will allow you to mitigate most Capital Gains Tax and Inheritance Tax problems
Wherever you are on your property journey, our team of property tax experts would like to help you
We’re good with start-ups, we like helping with one-off property decisions and growing portfolios but the sweet-spot for our team of Chartered Tax Advisors is difficult and complex property tax problems
Whether you’ve exhausted the technical ability of your existing team , or you just want to look at legitimate alternatives, let’s talk
Benefits of joint-ownership
Jointly owning property with one or more others can be very beneficial for tax purposes
Here’s some of the benefits:
They’re available on a per-person basis and you don’t even have to be married:
- Personal allowance
- Basic rate tax band
- £100,000 threshold for withdrawal of personal allowances
- £150,000 additional rate threshold
- Property income allowance
- Trading income allowance
- Private letting relief
- Business asset disposal relief
- NI earnings threshold and small earnings exception
If your existing advisor is claiming all of those for you then you likely don’t need us
Maybe you need to check because this is how much is at stake for joint owners:
- Up to £20,096 in Income Tax on rental income
- Up to £17,280 in Income Tax and National Insurance on trading profits
- Up to £425,528 in additional Income Tax savings
- Up to £7,214 on capital gains on residential property
- Up to £18,414 on capital gains with private letting relief
- Up to £183,444 on capital gains with business asset disposal relief
So, here’s the thing
You now know how much tax-saving is at stake for couples. For multiple owners, there could be even more
You’ve already got all that you need to assess the job your existing advisor is doing for you
It’s all about who you plan with..
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- Managing Director, T Clark & Son Ltd
