October 7, 2023

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Property Taxes: A Guide for Landlords in Lancaster

Are you Finding Property Taxes Complicated?

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If you’re a new landlord in Lancaster , you may find property taxes complicated and overwhelming.

At Property23, we are ready with some expert advice to help you better understand your obligations.

Recording Your Expenses

When completing a tax return, you should remember that some allowable costs can be deducted from the income you receive from your rental profit to reach your taxable profit amount.

However, renting out your property and the money you spend on it are split between two categories.

You can offset “Revenue Expenditure” against the income you receive from your rental property. These expenses must have been exclusively incurred to earn rental income, for example:

  • Maintenance services like gardening or cleaning
  • Business administration costs
  • Repairs and redecoration
  • Insurance
  • Fees for any professional services (e.g. an accountant or lettings agent).

“Capital Expenditure”, on the other hand, is subtracted from your capital gains when you decide to dispose of your property. Those are things which increase the property’s value, for example:

  • Adding an extension.
  • Upgrading the kitchen.
  • Carrying out major renovations.

Of course, some works include both expenditures, making recording expenses more complicated. Therefore, it’s wise to use an accountant’s services.

Higher Capital Gains Tax

Although tax is levied at 10% (at basic rate) or 20% (at higher rate) on your chargeable gains on your other financial assets, tax on gains from residential property is levied at 18% or 28%, depending on your tax band. You need to factor this in when planning the exit strategy for your property investment.

Capital gains tax is levied on the difference between your property’s original purchase and sale prices, with allowable deductions and personal allowances subtracted.

It isn’t charged on how much equity you have remaining.

Therefore, if you decide to remortgage the property at some point to release capital, you should always ensure you have sufficient equity remaining to cover your CGT bill should you suddenly need to sell.

Handling the financial side of your rental property can be a challenge, but you can rely on our expert team at Property23 to simplify the day-to-day management of your property.

As experts in the Lancaster rental market, we make it easy for local landlords to maximise their investment.

Call us today on 01524 969778 to learn more.