News

Check out market updates

12 Frequently Asked Questions About Residential Property Tax Cards

12 Frequently Asked Questions About Residential Property Tax

Navigating residential property tax can feel complex, especially with changing rules and numerous scenarios. Below are answers to 12 frequently asked questions to help you better understand this topic.

  1. What Expenses Can I Offset Against Rental Income?

Landlords can offset revenue expenses like maintenance, repairs, insurance, and agent fees against rental income. However, mortgage interest relief for individual landlords is restricted to a 20% tax credit. Capital expenditure, such as major property improvements, isn’t deductible immediately but can reduce your Capital Gains Tax (CGT) liability when you sell the property.

  1. Can I Offset Property Losses Against Other Income?

While property losses cannot offset employment income, landlords with multiple properties can offset losses from one property against profits from another. Unused losses can be carried forward to reduce future rental profits, provided they are reported on your self-assessment tax return.

  1. Can I Transfer Property Ownership to My Spouse?

Yes, transferring property ownership to a lower or nil-rate taxpayer spouse is a tax-efficient strategy. If your spouse earns less, their tax-free personal allowance (up to £12,570) can significantly reduce overall tax liability on rental income.

  1. What is Deemed Occupation for Private Residence Relief (PRR)?

Private Residence Relief exempts CGT on the sale of your main home, provided you occupied it as your primary residence. Periods of deemed occupation include:

  • Time spent working abroad.
  • Up to four years working away from home.
  • Periods not exceeding three years of absence.

For more detailed guidance, visit HMRC PRR Overview.

  1. Can Spouses Have Separate Main Residences?

Spouses or civil partners living together can only have one main residence. However, they can jointly nominate a property for Private Residence Relief within two years of a change in residence status.

  1. Can I Transfer My Properties to a Limited Company?

Transferring properties to a limited company offers benefits like shifting income to corporation tax rates and full mortgage interest deductions. However, this may trigger CGT and Stamp Duty Land Tax (SDLT) liabilities. Relief options like Incorporation Relief may mitigate these taxes.

  1. Can I Gift My Property to Children?

Gifting property is considered a Potentially Exempt Transfer (PET) for inheritance tax (IHT) purposes. To qualify for full exemption, the donor must survive seven years and relinquish all benefits from the property. Otherwise, the property remains part of the donor’s estate for IHT.

  1. What Are the Different Stamp Duty Land Tax (SDLT) Rates?

SDLT rates vary depending on the property’s value and purchase date. As of now, residential properties are taxed as follows:

  • Up to £250,000: 0%
  • £250,001 – £925,000: 5%
  • £925,001 – £1.5 million: 10%
  • Above £1.5 million: 12%

Note: Additional surcharges apply to second homes or properties purchased by companies.

  1. Do First-Time Buyers Pay SDLT?

First-time buyers enjoy SDLT relief on properties up to £425,000. For properties between £425,001 and £625,000, partial relief applies. After April 2025, the threshold decreases to £300,000.

  1. Are Higher SDLT Rates Applicable to Additional Properties?

Yes, a 3% surcharge applies to second homes. However, you can claim a refund if you sell your previous main residence within 36 months of purchasing the new one.

  1. What is the Annual Tax on Enveloped Dwellings (ATED)?

ATED applies to companies owning properties over £500,000. The tax is calculated based on property value bands, with reliefs available for specific circumstances. Even if exempt, filing a return with HMRC is mandatory.

  1. Where Can I Get Professional Advice?

Understanding property taxes can be challenging. At Care4Properties, we provide expert advice tailored to your unique needs. For assistance, check out our Tax Services.

 

Disclaimer

The information on this Blog is for general purposes only on matters of interest. The Company assumes no responsibility for errors or omissions in the contents of the Blog. Even if the Company takes every precaution to ensure the Blog’s content is current and accurate, errors can occur. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained on the Blog. The Company is not responsible for any errors or omissions or for the results obtained from using this information. The Company reserves the right to make additions, deletions, or modifications to the contents of the Blog at any time without prior notice.

In no event shall the Company be liable for any special, direct, indirect, consequential, or incidental damages or any damages whatsoever, whether in an action of contract, negligence, or another tort, arising out of or in connection with the use of the Blog or the contents of the Blog. The Company does not warrant that the Blog is free of viruses or other harmful components.