Following the changes to the taxation of buy to let properties many are considering putting their buy to lets into a company. This is particularly relevant for higher rate tax payers who will lose valuable interest relief and in the light of extra 3% of stamp duty from April.

Certainly it may help higher rate tax payers as a company will still be able to deduct mortgage interest when calculating profits and indeed the mortgage market is beginning to realise that they will need to offer mortgages where applications can be made by companies. On the stamp duty hike, it will be companies with 15 properties or more who are exempt from the tax hike.  The other matter to be considered is the extra costs associated with a limited company.  And, finally the tax position on the eventually extraction of profits from the company and here we have the new dividend tax to consider.

So in summary a limited company would probably be a good option for professional buy to let investors with multiple properties. But the amateur landlord may be better off staying as they are.

Before you make any decision about forming a limited company, you should contact a tax Specialist to weigh up the pros and cons. If you wish to discuss this in more detail, please do not hesitate to contact me.

Income generated from property has always been a favourite of HMRC and the current property sales campaign is aiming to encourage taxpayers to voluntarily come forward and declare any gains which might be taxable.  Taxpayers have until the 9th August 2013 to tell HMRC and until the 6th September to pay any tax!

After that HMRC says it will “use the information it holds to target those who should have made a disclosure under this campaign and failed to do so.”   This is not to be underestimated!  There is a wealth of electronic information available these days including Land Registry records and Voters lists, which can be cross referenced with tax returns.

HMRC is also keen to track down undeclared rental income and we have it on good authority that they are planning to step up this activity by serving information notices on Letting Agents to gather names and addresses, amounts etc.  We have seen this tactic used to great effect in the past resulting in a flurry of tax payer enquiries!

If this is you, you might be thinking “should I stay hidden or come clean?”  My opinion is that a voluntary declaration is the best route forward.  The financial consequences will be less, certainly as far as penalties are concerned, and you don’t have to worry about the nasty letter or knock on the door. This type of disclosure is ideally managed and dealt with by a tax professional, so give me a call if you need my help.