Property

Our Accounting Services for the Property Sector

Our team delivers specialised property accounting solutions designed specifically for property investors, landlords, and developers. We understand the unique financial challenges and opportunities within the property sector.

Additionally, we provide ongoing support to help clients achieve their financial goals, including proactive advice aimed at maximising property investments and enhancing returns.

Bookkeeping and Accounts Management

We provide comprehensive bookkeeping services and accounting packages tailored to both residential and commercial property businesses of all sizes. Our experienced accountants handle your day-to-day financial transactions, ensuring accurate record-keeping and timely reporting.

You’ll benefit from our expertise in:

• Transaction processing – recording rent payments, expenses and property-related costs

• Bank reconciliations – ensuring all your financial records match your bank statements

• Service charge accounting – managing separate accounts for service charges and maintenance funds

We utilise leading online accounting software that gives you 24/7 access to your financial information. This cloud-based approach makes it easy for you to check your property accounts from anywhere, at any time.

Regular management reports help you track the performance of your property portfolio. You’ll receive clear insights into your cash flow, profitability and tax position. Our services also contribute to maintaining your financial health, ensuring a well-balanced and successful investment strategy.

Self Assessments and VAT Returns

Meeting your tax obligations accurately and on time is crucial for property businesses to ensure compliance. Our team handles all aspects of your Self Assessment returns, ensuring you claim all available allowances and reliefs.

For VAT-registered property owners, we offer:

• Quarterly VAT return preparation and submission

• Advice on VAT schemes most suitable for your property business

• Guidance on complex property VAT issues including the option to tax

We stay current with HMRC regulations affecting the property sector. This means you’ll always receive up-to-date advice on tax-efficient strategies for your property investments. We also manage HMRC enquiries, representing you during tax-related proceedings to ensure your affairs are handled effectively.

Our proactive approach helps you plan ahead for tax payments and avoid unnecessary penalties. You’ll appreciate our clear explanations that make complex tax matters easier to understand.

Tax Obligations for Property Owners

Understanding property tax obligations can help you manage your finances effectively and avoid unexpected tax bills. Our property tax specialists aid you with this. It is crucial to be aware of various tax legislation changes and property tax implications to ensure you remain informed about the latest developments and their potential effects on your property ownership and business operations.

Property Tax for Landlords and Investors

You must pay Income Tax on rental profits from your properties. This includes income from residential lets, holiday rentals, and commercial properties. As a property investor, you need to declare this income on your Self Assessment tax return annually.

For residential properties, you can deduct allowable expenses such as:

• Mortgage interest (restricted to basic rate tax relief)

• Insurance premiums

• Maintenance and repairs

• Letting agent fees

• Utility bills you pay

The 3% Stamp Duty Land Tax (SDLT) surcharge applies when purchasing additional properties beyond your main residence. However, you might be eligible for a rebate in certain circumstances, such as replacing your main home.

Capital Gains Tax and Tax Reliefs

When you sell a property that isn’t your main home, you may face Capital Gains Tax (CGT) on the profit. For property sales, the CGT rates are higher than for other assets – 18% for basic rate taxpayers and 28% for higher rate taxpayers.

You can reduce your CGT liability through several reliefs:

Principal Private Residence Relief eliminates CGT on your main home for periods you lived there.

Lettings Relief may reduce your tax bill if you’ve let out part of your main residence.

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) might apply if you’re selling business premises, potentially reducing CGT to 10%.

Remember to report property disposals and pay any CGT due within 60 days of completion through a Capital Gains Tax return. Understanding the financial performance of properties in relation to the capital that has been invested is crucial for effective planning and compliance with tax obligations.

Inheritance Tax and Trusts

Property often forms a significant part of your estate for Inheritance Tax (IHT) purposes. UK properties are subject to IHT at 40% above the nil-rate band threshold (currently £325,000).

The residence nil-rate band provides additional relief (up to £175,000) when passing your main home to direct descendants.

Using trusts can be an effective way to manage property for IHT planning:

• Discretionary trusts

• Interest in possession trusts

• Bare trusts

These arrangements may help reduce your IHT liability, but they have their own tax implications and reporting requirements.

Agricultural and business property relief might apply to certain properties used for business or farming purposes, potentially reducing IHT by 50% or 100%.

Seek professional advice from our chartered tax advisers to create an effective inheritance plan that aligns with your goals. Our firm tailors its services to meet the unique needs of each of our clients, ensuring personalised and effective solutions.

Business Structures for Property Investment

Choosing the right business structure for your property investments can significantly impact your tax and accounting obligations, as well as your long-term profitability. The structure you select will affect how income is taxed, how you can access funds, and your personal liability. Effectively managing your property investment portfolio is crucial to achieving your investment goals.

Limited Company vs Sole Trader

When investing in property, you can operate as a sole trader or through a limited company. As a sole trader, you and your business are legally the same entity, making setup simple with minimal paperwork. All profits are taxed as personal income at rates up to 45%. However, it’s important to consider making tax digital requirements to ensure compliance with the latest tax legislation.

Limited companies offer separation between you and the business. Corporation tax (currently 25%) applies to profits instead of income tax. This structure is often more tax efficient for higher-rate taxpayers or those with multiple properties.

Many investors now opt for a limited company structure, especially since mortgage interest is fully deductible for companies but restricted for individual landlords. With a company, you can also leave profits within the business to reinvest, paying tax only when you extract funds. Staying compliant with tax digital regulations is crucial for modern property management and reporting to HMRC.

Partnerships and Joint Investments

Partnerships allow you to share property investments with others, including property developers, while potentially spreading tax liabilities. In a standard partnership, each partner pays income tax on their share of profits according to their personal circumstances.

Limited Liability Partnerships (LLPs) combine elements of partnerships and limited companies. Partners have limited liability, but profits are still taxed as personal income rather than corporation tax.

Joint ventures are another option for property investments, where two or more parties collaborate on specific projects. These arrangements can be structured through contracts rather than forming a separate legal entity.

For married couples or civil partners, joint ownership can provide tax advantages by utilising both individuals’ tax allowances and potentially keeping income in lower tax bands. Implementing cost-saving strategies can help save money and enhance financial returns.

Tax Implications of Each Structure

Limited companies pay corporation tax on profits at 25%, typically lower than higher-rate income tax. However, extracting money through dividends incurs additional tax, though often at lower rates than income tax on the same amount. Effective tax management is crucial to minimise liabilities and optimise financial outcomes.

Sole traders face income tax rates up to 45%, plus National Insurance contributions. All property income is added to other earnings, potentially pushing you into higher tax brackets.

With partnerships, profit distribution affects individual tax positions. Partners pay tax according to their share of profits and personal tax situation.

The “one property per company” approach is gaining popularity as it allows for targeted refinancing and potential future sales without affecting other investments. It also provides asset protection benefits by isolating liabilities.

Remember that mortgage interest is fully tax-deductible for companies but restricted for individuals, making company structures increasingly attractive for leveraged property investments. Dealing with tax-related issues, such as correspondence and inquiries with HMRC, is essential to ensure compliance and avoid potential pitfalls.

Our Specialist Tax Planning and Advice

We provide tailored property tax solutions that help landlords and investors maximise their returns while ensuring full compliance with UK tax regulations. Our expert advisers offer unlimited expert advice, understanding the complexities of property taxation and providing practical strategies to optimise your financial position. Our expert guidance ensures reliable financial planning, complemented by personalised service and proactive solutions to enhance your success and compliance with HMRC regulations.

Tax Planning for Buy-to-Let and HMO

Buy-to-let and Houses in Multiple Occupation (HMO) investments require specific tax planning approaches to maximise profitability. We assist you in structuring your property ownership in the most tax-efficient way, whether as an individual, partnership, or limited company.

For buy-to-let properties, we assess your overall portfolio to identify potential tax savings through:

• Income splitting between spouses or civil partners

• Capital allowance claims for qualifying expenditure

• Expense optimisation to ensure you’re claiming everything permissible

HMO properties often have additional tax complexities. We provide guidance on:

• Claiming enhanced expenses specific to HMO management

• VAT considerations for larger HMO operations

• Capital Gains Tax planning for future property disposals

Our advisers deliver personalised strategies based on your specific circumstances and long-term investment goals. Additionally, we offer ongoing support to help you achieve your financial goals through proactive advice aimed at maximising your property investments and enhancing returns.

Stamp Duty Land Tax and Mortgage Interest Relief

Understanding Stamp Duty Land Tax (SDLT) is crucial for landlords property investors. We help you navigate the various rates and potential reliefs available, including:

• First-time buyer relief

• Multiple dwelling relief for portfolio purchases

• Mixed-use property considerations to potentially reduce SDLT liability

The phasing out of mortgage interest relief has significantly impacted landlords’ tax positions. We provide clear advice on managing these changes through:

• Restructuring existing finance arrangements

• Exploring incorporation options where beneficial

• Implementing alternative investment structures

Our tax planning considers both immediate SDLT implications and long-term mortgage interest strategies. We offer a comprehensive consultation to review your current position and identify opportunities for tax efficiency across your property investments. Our team of UK property accountants provide tailored strategies and expert advice to help you navigate the complexities of property tax.

We handle Your Properties With Care

At Cottons, we understand the unique challenges you face as a property owner, landlord, or investor.

Our team treats your investments with the utmost care. We don’t just crunch numbers—we provide comprehensive property management accounting that helps you maximise returns and minimise tax liabilities. Maintaining your financial health is crucial, and our services are designed to simplify accounting and manage common financial challenges, ensuring a well-balanced and successful investment strategy.

What we offer:

• Detailed financial reporting and property accounting

• Tax-efficient strategies

• Regulatory compliance

• Rental income management

• Expense tracking and categorisation

Your property portfolio deserves specialist attention. Whether you own one flat or multiple commercial buildings, our property accountant specialists create tailored solutions that fit your specific needs.

We work closely with property managers to ensure seamless integration between day-to-day operations and financial management. This collaborative approach helps identify opportunities for cost savings and revenue growth.

You can trust us to handle your financial matters with the same care you would yourself.