1. Use specialist landlord software for your accounts
Managing a property portfolio requires keeping on top of lots of paperwork. Many landlords still rely on spreadsheets or other time-consuming methods to keep track of their tax obligations, rental yields, loan-to-value ratios and expiring documents and certificates.
These days, you can drastically simplify your property management with specialist landlord software. Designed with the needs of landlords in mind, you can use it to track your property finances in real time from almost any PC or mobile device. If you start using this software now, it'll also help ensure you are compliant when Making Tax Digital for Income Tax is finally introduced.
2. Protect your income
In today's economic climate, more and more tenants are struggling with the cost of living. This makes it more likely that they will default on the rent. To help prevent this happening, always ensure you undertake tenant referencing checks and have a compliant tenancy agreement.
3. Be careful of Capital Gains Tax
If you need to sell a property, remember that the rules for Capital Gains Tax (CGT) on property have changed. These days you only have 60 days from the sale of a rental property to calculate, report and pay CGT to the taxman. If you don't, you can get hit with both penalties and interest.
To avoid this, it's best to consult a specialist accountant like THP before you sell a property. They can advise you on potential ways of legitimately reducing your CGT bill. Then, when you sell, they can report and pay Capital Gains Tax on UK property for you – ensuring you submit an accurate return and avoid penalties.
4. Save tax by transferring property to your spouse
If you are a higher or additional rate taxpayer, you may be able to save money by transferring some or all of your property portfolio to your spouse. This can be particularly beneficial if you are a higher or additional rate taxpayer and your spouse is a basic rate taxpayer or doesn't pay tax. For example, if you give your spouse half of a property, half the rental income goes on their tax return, not yours. This means they can make use of their income tax personal allowance and, as long as the income isn't too high, will pay tax at the basic rate. In some cases, transferring part of the property will also bring you down a tax band, allowing you to make significant tax savings.
While property transfers between spouses don't attract CGT, do be aware that they might attract stamp duty. Have a chat with a THP accountant if you'd like more advice.
5. Do things by the book
Sometimes it can be tempting to take shortcuts with property management, but this can end up being an expensive mistake. For example, if you need to evict a tenant, you must follow the correct legal procedures for either a Section 21 eviction (soon to be abolished) or a Section 8 eviction (soon to be strengthened). If a tenant won't leave a property, you then need to apply to the court for a Standard Possession Order or an Accelerated Possession Order. If the tenant still won't leave, you need a Warrant of Possession. This can only be enforced by a bailiff, such as those instructed by AST Assistance. In the past landlords have tried to evict tenants themselves, only to end up in court charged with an illegal eviction. Don't risk it!
Summary
I hope you have found these property management tips helpful. As well as working for THP – the accountants for landlords – I also manage my own property portfolio. While it's true that times are currently tougher in the buy-to-rent sector, there are still margins to be made. I've found that landlord software has greatly simplified managing my rental homes, though I've still taken great care to protect my income and the properties themselves.
