Landlord, agents, tax

thg

G'day all,

I'm a landlord of a single property which is being rented to tenants. It is managed by a letting agent in order to fulfill all the legal requirements and deal with issues as they arise. In terms of tax, I have declared the income to HMRC through self assessment every year. This has worked well so far as the reliefs and income thresholds resulted in no additional tax being levied.

With the tapering off of the mortgage interest relief I can see that future years will likely incur a possible bigger tax bill at year end. I'm keen to avoid a big one off payment. Do other landlords tend to pay tax through the letting agent? I understand it's possible for them to deduct the tax monthly. This would result in lower monthly income but no surprises come year end.

Furthermore, a recent promotion means I will enter the higher tax bracket. So another option could be to keep the payment of income tax on the property until the self assessment and throw some money at a SIPP. If organised correctly I could perhaps offset the (extra) 20% relief through self assessment to any tax due on the property, and any extra can be added to the pension.

What do others do? Are there any advantages in setting up arrangements in a certain way? The sums are hard (at least for me!) to work out, but my objective is to smooth out income and tax rather than contend with big one-off bills.

Cheers

theartfullodger

thg wrote: »

......
I'm a landlord of a single property which is being rented to tenants. It is managed by a letting agent in order to fulfill all the legal requirements and deal with issues as they arise...........

Very amusing:


No offence - and not what you asked - but posts hereabouts and on other landlord-frequented sites show all too often agents do NOT always fulfill all the legal requirements and deal with issues as they arise.


You the landlord remain responsible and should check, from time to time, on what your agent is doing.


There are good agents - I use two - but sadly they are the exception rather than typical.

csgohan4

the question is do you trust the EA to keep payments aside, I would personally take it all and put in savings account.

thg

Understand there are some bad agents out there. I (and my tenants) are very happy with ours.

We treat our tenants well (fair rent, probably a little under market rate, quick repairs and high quality kit out) and in return they have been appreciative, pay on time and keep the house in good order. I know this can change but so far this has worked out well for us.

G_M

Letting agents are not accountants. Don't rely on them for tax advice, payment or other tax-relatd matters.


Letting agents are not banks. Don't rely on them for savings accounts or other means to manage your tax finance.


Either DIY or use an acountant and bank savings acount.

00ec25

thg wrote: »

G'day all,

I'm a landlord of a single property which is being rented to tenants. It is managed by a letting agent in order to fulfill all the legal requirements and deal with issues as they arise. In terms of tax, I have declared the income to HMRC through self assessment every year. This has worked well so far as the reliefs and income thresholds resulted in no additional tax being levied.

With the tapering off of the mortgage interest relief I can see that future years will likely incur a possible bigger tax bill at year end. I'm keen to avoid a big one off payment. Do other landlords tend to pay tax through the letting agent? I understand it's possible for them to deduct the tax monthly. if you literally mean "deduct "tax", then either you are confusing it with the rules applied to overseas landlords, or you are talking nonsense This would result in lower monthly income but no surprises come year end.

Furthermore, a recent promotion means I will enter the higher tax bracket. So another option could be to keep the payment of income tax on the property until the self assessment and throw some money at a SIPP. If organised correctly I could perhaps offset the (extra) 20% relief through self assessment to any tax due on the property, and any extra can be added to the pension.

What do others do? Are there any advantages in setting up arrangements in a certain way? The sums are hard (at least for me!) to work out, but my objective is to smooth out income and tax rather than contend with big one-off bills.

Cheers

if you cannot trust yourself to manage your own cashflow then by all means ask the agent to deduct whatever you/they want: bear in mind the following:

- the agent has NO IDEA AT ALL what your personal circumstances are and cannot possibly "deduct" the correct amount of money "each month".

- what is the difference between your agent deducting a sum of money for the rent and you doing that yourself?

- interest rates may be pants, but if really are unable to manage setting aside a sum of money each month in a savings account you should consider asking someone to train you on how to manage your money

Whilst I understand you desire to "smooth" your cash flow, the idea of paying it to HMRC on a monthly basis has to be the worst example of non money saving expert ever suggested on here. HMRC are not set up to deal with such payments. The onus is still on you to do an annual reconciliation between cumulative payments and annual liability. Until you do your that as part of your annual tax return, including your salary, you will have no confirmation of the final liability and no idea if you have over or under paid