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Saving tax in Property

Save tax on rental property


A married couple/registered civil partner may well be able to save tax on jointly held properties they rent out. If the property is held as tenants-in-common then it is possible to notify HM Revenue and Customs the proportion of property they each own (e.g. 20% and 80%) with the lower earning spouse/partner having the bigger share. The rental income will then be taxed between the spouses/partners in the same proportions.

If you are buying residential property to rent out, you may wish to check whether the property is in a designated disadvantaged area. Some of these are in surprising locations. Residential property worth £150,000 or less is exempt from Stamp Duty Land Tax.

If you rent out residential property it may be possible to save tax against the rental income on the cost of loft or cavity wall insulation. The government is proposing to extend the relief, known as “Landlord’s Energy Saving Allowance”.

If you are looking to invest in residential property, have you considered renting it out as a holiday home? There can be benefits providing certain conditions are met.
  • The rental income would be treated as earnings for pension purposes allowing higher pension premiums
  • It may be possible to roll over Capital Gains Tax in some situations into the property
  • When you come to sell the property the Capital Gains Tax may well be significantly lower than had the property just been rented out as someone’s home

Buying new plant for your business?


First year capital allowances on plant and machinery for small businesses are 50% until March 2007 when they revert back to 40%. If you are looking to buy new machines or fittings then you may wish to do so before the rate reduces to claim the higher initial relief.

If you are buying new plant, have you considered purchasing more environmentally friendly plant? Not only could you be helping the planet, but 100% of the cost could be allowed, saving the business tax for the period.

Further details can be found on the internet; www.eca.gov.uk. Acquire before the business year end and get the relief 12 months early.

Starting a new business

If you start up in business, either as a sole trader or partnership, then the Inland Revenue must be notified within 3 months of commencement to trade if a £100 penalty is to be avoided.

The same applies for companies starting or restarting a trade, although the penalty is initially up to £300, with a potential £60 daily penalty.