How a Property Tax Accountant Can Optimise Tax-Efficient Trading

The property sector has long been dynamic, fast-moving and subject to rapidly changing regulations – and the current market is no exception. There is a core need for investors, property owners, landlords, and companies engaged in property development, renovations, rentals, and holiday lets to have a firm grasp over their revenues and tax exposure.

Despite the challenges around stricter legislation in the private rental sector and some limitations imposed on short-term rental real estate, there remains scope for businesses and investors to recognise excellent returns, provided they pay close attention to the tax efficiencies available.

Let us summarise how we can assist as a team of specialist property tax accountants and advisers, some of the potential strategies that may be advantageous, and share tips on optimising your tax position as a property professional.

The Importance of Tax Efficiency for UK Real Estate Businesses

There is no doubt that accounting and budgeting for property taxes can be complex, with myriad possible taxes that could apply, depending on the nature of your business, the transactions within each tax year, and whether you own or invest in real estate as an individual or organisation. As a quick recap, these could include:

• • Stamp Duty Land Tax
  • Capital Gains Tax
  • Inheritance tax
  • Income tax
  • Corporation tax

One of the simplest and first steps to improving the tax efficiency of your property business is to ensure you know which taxes you may be exposed to, what the charge is likely to be, and whether there are allowances, deductions or exemptions you can claim.

Capital Gains Tax is a great example because although most property owners will have a tax charge to pay on the gain or profit when they sell a property asset, that can also potentially be reduced if they are eligible for Letting Relief, Private Residence Relief, Business Asset Rollover Relief, or Business Asset Disposal Relief – among others.

Without going into the intricacies of each type of tax relief, these are available in varied circumstances and might mean that if you’re selling one property to buy another, you can offset or postpone your tax liability.

How a Property Tax Accountancy Team Creates Custom Tax Strategies

Optimisation means we analyse your trade, incomes, expenditures, investments, plans, and returns and provide exacting tax advice about how to structure your business and ownership. We can recommend ways to legally and compliantly reduce unnecessary tax exposure by using all of the options available to you.

Strategic tax planning is normally an ongoing service. We consult with property clients over time and get to know their objectives, working together before any major decisions to find ways to reduce tax liabilities, release capital for new projects or investments, or lower overheads to boost profitability.

Most property businesses end up paying more tax than they should because they manage each transaction or asset on a standalone basis without considering their broader portfolio and how taking a wider view of their activities can highlight readily available tax efficiencies.

For instance, you might compare individual vs company ownership, depending on whether this would impact other aspects of your business, such as access to financing products and the contrasts between corporation and personal taxation.

Similar tax advantages may apply to landlords of residential or commercial rental properties, with underutilised tax-deductible expenses being one of the most common ways to instantly improve their tax position.

Making full use of capital allowances, tax allowable maintenance and repair costs, and the somewhat limited mortgage interest relief is essential, while ensuring you categorise and claim expenses correctly.

Remaining Compliant With Changing Tax Legislation as a Property Investor or Developer

Another important consideration is how you respond to changes to the applicable rules or regulations, depending on the focus of your property business.

Being proactive about adhering to evolving standards ensures that residential landlords and other property business owners can avoid exposure to penalties while deploying an effective tax strategy.

Alongside tax calculations, allowances, deductions, reliefs, and declarations, our property accounting team can assist with business risk evaluations and assessments of how forthcoming changes will impact your revenues, ensuring you build in sufficient time to make necessary adaptations.

Some of the most in-demand accounting and financial advisory services incorporate both tax planning and other finance-related tasks, such as:

• • Handling general tax administration, such as outsourced bookkeeping, quarterly or monthly management accounting and tax forecasting.
  • Preparing and submitting tax returns, financial accounts and declarations, avoiding errors and mis-declarations, while ensuring your statutory reporting is timely.
  • Helping to ensure your record-keeping is well organised, with traceable incomes, outgoings, and profit margins, giving you clarity over the financial performance of your business, the associated tax liabilities, and when these will fall due for payment.

Working with a skilled property accounting team ensures you have this level of insight into all the elements of your business, know exactly when and how tax charges will be payable, and can rely on forecasts to help with decision-making, especially when planning higher-value property investments, sales and developments.

Professional Tax Assistance for Property Businesses Liaising With HMRC

Finally, it may be vital to have a tax accountant on hand who knows your business, understands your trading model, and can step in if you are subject to an HMRC investigation.

While these may be uncommon, any audit of your records, tax returns, asset declarations and financial affairs can be incredibly stressful and put pressure on your time and resources, especially if you are already working to capacity.

Tax accountants communicate with HMRC every day and have a thorough understanding of the remit and purpose of tax audits and checks. James Todd & Co can represent your business, provide records or reporting as required, and work swiftly to handle any issues that may arise.

As we’ve seen, property tax accountancy isn’t limited to preparing returns or filing tax declarations but is a fundamental aspect of running a business in the most tax-efficient manner possible. We provide financial guidance and support along the way to ensure you maximise revenues and make informed, secure financial decisions as your business grows.

For more information about tax accountancy, our property specialists, or any of the services we have touched on here, please contact the James Todd & Co team at your convenience.