Can Expert Accountants for Landlords Make Buy-to-Let Investments More Viable?

The challenges encountered by the property sector over recent years are far from a secret. With sustained high interest rates over an extended period—now finally beginning to drop—and pressure arising from stricter regulation, many buy-to-let landlords have needed to reconsider their positions.

One of the biggest issues prompting a proportion of landlords to think about either restructuring their businesses as limited companies or opting to sell at least some of their investment assets has been the reforms to tax relief. As with any major taxation overhaul, this makes professional accounting services essential to avoiding unnecessarily high tax burdens and seizing tax efficiencies.

Let’s take a look at the current scenario for prospective and existing buy-to-let landlords and some of the many ways an experienced, accomplished and chartered team of accountants and advisers offering landlord accounting services can assist.

Navigating a Changing Property Market as a Buy-to-Let Landlord

Taxes have always been a pivotal aspect of running any business, and for landlords, particularly those with smaller portfolios or perhaps one or two buy-to-let investment properties, the changes to tax reliefs and other legislative reforms may have dented their net profitability.

The impacts of high interest rates have added to the difficulties, with financing harder to secure, especially on more ambitious or higher-geared investments, and stricter licensing on specific types of investments, including HMOs.

From an accounting perspective, the trick is always to stay ahead of taxation or regulatory reforms before they happen by creating long-term, sustainable strategies that will keep your business buoyant and prepared to diversify or pivot when new opportunities arise.

Despite the headline figures, the realities are that astute planning and financial advice can often turn possible business-critical pressures into positives since:

• As many as 20% of landlords invest in buy-to-let properties or turn residential homes into rental properties without sufficient knowledge and experience.
• 15% of those selling have done so due to rising costs, without considering ways to restructure their businesses or find cost-efficiencies to keep those expenditures under control.
• Almost a quarter—24%—of landlords have said that tenant management has put greater strain on their mental health without exploring options like outsourcing day-to-day management to a lettings agency.

While this is a simplistic overview, and the right solutions will never apply universally to all businesses, the underlying point remains: there are still ample opportunities for profitable, smart investment and strong returns on the property market, provided you seek out the right advice and guidance.

How Can Expert Accountants Support Buy-to-Let Property Investors Experiencing Business Downturns?

Our real estate specialists and landlord accounting advisers will always start by discussing your current business set-up, revenues, expenditures, risk factors, accounts and rental property portfolio before we make any suggestions.

That is because, as we’ve intimated, much will depend on the size of the business and the relevant tax aspects. We might, for example, recommend very different strategies to small businesses, such as landlords with one second property they rent out, compared to those appropriate for larger-scale portfolio investors with multiple HMOs.

Below, we’ve summarised some of the primary areas where we can add value, many of which are relevant to most landlords.

Assessing Your Current Use of Tax Relief and Tax Planning Opportunities

Although the changes to tax relief haven’t worked in landlords’ favour, this has made it even more important to ensure you take full advantage of every relief, allowance, exemption, and tax break available. Optimising your tax position ensures you have an accurate idea of forthcoming tax liabilities and can build those obligations into your budgets.

That could mean considering capital gains tax exposure when planning sales, verifying that all expenses have been categorised and declared correctly on your tax returns, and assessing whether you are potentially paying more income tax as an individual landlord or corporation tax as a limited company than you should.

Property tax can be a complex area, and our role as your property accountant is to regularly review your position, ensure you understand the qualifying conditions to claim particular allowances or deferrals and utilise all beneficial tax treatments while making sure your returns and declarations stay compliant.

Creating Long-Term Business Financial Management Plans

The property market can move quickly, as demonstrated during the pandemic, and it is normal for businesses to experience peaks and troughs.

Resilience matters, where sustainable and ongoing profitability doesn’t usually appear immediately but is dependent on informed, strategic planning with one eye on the broader market, economy and trends in property rental.

Developing customised planning ensures that any big moves, from buying or selling property to choosing between letting a residence as a furnished holiday home or long-term rental opportunity, are made with care and contribute to your big-picture goals.

Some landlords have used recent market pressures to expand their existing portfolios in areas with suppressed sale prices, for example, or have repurposed residential homes into holiday lets where there are gaps in the market or unmet local demand they can capitalise on.

Staying Current With Legislative Changes and Their Impacts on Property Investors

Knowing how regulations are expected to change means you can improve your preparedness. Monitoring proposals, initiatives, schemes, and governmental investments helps landlords stay poised to react or gives them the capacity to implement new plans or contingencies in plenty of time.

Examples include opportunities to renovate or improve the energy efficiency of properties in areas with strong or emerging demand from certain rental demographics and the ability to use the lower costs of running a modern rental home as a selling point while meeting ever-stricter targets before they become enforceable.

Rental rates across the UK are forecast to continue growing year-on-year, and in many cases, simple tweaks to improve tax efficiencies and manage overheads can significantly impact your bottom line.

Finally, we may recommend putting financial protection in place in light of the risks involved in running and letting a rental property.

Great insurance coverage, legal protection, and safeguards against unwanted tenant behaviour can stabilise your business’s liquidity and viability, with reliable advice from our James Todd & Co landlord accounting team about this and any other aspect of your business always available on demand.