Property rent is also subject to income tax, like the money earned from other properties. The owner often pays more rental tax than required. The primary reason behind this is the lack of knowledge.
You can decide the amount to pay as a tax by calculating the total income you receive from rent and subtracting the maintenance charges. You will get your tax payments percentage. Moreover, you must consider the profit-and-loss situation here too. Thus, keeping profits and losses in sight and knowing the tips to reduce tax on rental property may help the landlords.
Alternatively, if the loss is higher than profits, tax implications are low. Analyse the payment modes. If you still have pending rent but do not want to miss the tax payment date, check facilities like urgent loans for bad credit in Ireland’s marketplace. It would help you clear the payment by the deadline without worrying about poor credit.
However, if you could reduce the amount drastically, you would not panic at the last moment.
The article will help you know how you can reduce liabilities over rental property tax implementation. Let’s first know a few facts:
A few facts about rental property taxation
If you are a regular taxpayer as a landlord, you must know the following facts:
- You must declare your rental income by the end of the year of the tax return.
- You must file the tax return online by the 31st of January following the 5th of April.
- You pay an on-account tax payment on 31st July, and we must pay the balance in full by 31st January after filing the tax return.
- If you share the beneficial interest with someone else, only declare your share of rental income in your personal tax return.
- Declare a deed of Trust if you share property income in proportion to your beneficial interest
- You must pay the rental income tax when you receive the notification. If you receive the rent late, you must file it within the next tax year.
Thus, now you know the facts. It would help you know the property tax implications and the right time to pay it off. Now, let’s consider the best ways to reduce liabilities on tax payments.
7 Ways to Curtail tax payments on a rental Income
However, the interest rates may remain low in the upcoming years, and increased rental profits mean more tax.
Let’s check ways to remain efficient on your tax income:
1) Claim all deductible expenses
There are some costs that landlords may claim as a part of taxation relief. You must know these as it would help you reduce the total payable amount. These are:
- Landlord insurance- building, contents, and public responsibilities
- Agent and management fees
- Ground rent and service tax
- Furnishing, gardening, cleaning services
- Accountants and other legal fees
- The cost of renting a room through marketing
- Telephonic bills, if used only for business purposes
If you have any of these expenses, claim it and check the new balance.
2) Transfer the buy to let to a limited company
After 2022, you can no longer offset a mortgage repayment from the rental property income. So, eventually, you pay more tax in this case.
However, if you transfer the buy-to-let property to a limited company, you can legally deduct mortgage payments from a rental income. Afterwards, you just need to pay Corporation tax on the net profit. However, to reduce the net profit further, check other costs you may legally deduct.
After paying the corporation tax, distribute the profit as tax dividends. It would have lower tax implications than income.
Next, you must check whether you must pay stamp Duty tax. If yes, you may have to pay the Capital Gain tax again.
3) Invest in other properties
It is one of the best ways to analyse your portfolio and expand it further. You can avoid paying additional charges in the name of duty. By doing so, your property price will increase. Moreover, the recent property development rights allow landlords to do so. It would be an excellent way to generate more income.
Moreover, undertake the price of the properties in the locality where you have your property. It would help you price your property right.
If you undertake development to attract potential clients, the changes made by the authority may impact your decisions. Thus, analyse the guidelines to expand the buy-to-let space beyond a certain extent. Walking by the law would help avoid penalty or property seizure.
4) Consider loss from previous years
In global events like the Pandemic, many landlords suffer a loss. In that case, your outgoings surpass the rental income. You can mention these in your tax return.
You can mention issues like no renter until 8 months and repair costs for an empty flat or property. Eventually, it would help you get some relief on the total tax amount or liability. It would also reduce your overall profit percentage. It is good from the tax-saving point of view.
5) Rent property for short-term
Yes, you can save some money on tax if in between tenants. Instead, you can utilise this time frame to claim Council tax and utilities. Well, you may be a renter to live on the property for a long time. It may not be beneficial from the taxation aspect. Instead, prioritise short-term renting.
It would reduce the renting history, and the overall taxation amount would be low. By renting on a weekly or monthly basis, you can limit taxes. Moreover, it can fix the rent rates quickly according to the market rates. It is more profitable than a long-term agreement.
Maintenance costs would be low, too. You can easily maintain the property without much update. Do not forget to claim the maintenance costs. If you still need to finance the costs, online loans in Ireland may help. You can get it quickly online and finance the rest of the requirements accordingly.
While these tips may help you reduce tax implications on rental income, you must hire experts. Knowledgeable people like bookkeepers and assessment consultants can help you with better insights. You can get an approx. The amount that you can save on taxes. It is because, in the end, the savings matter!