Tax Breaks for HMO Investors

Here’s a list of things you can claim in your property business to reduce your tax (thanks to Billy Turriff for compiling this).

1. Pay yourself the most effective salary so that you stay under the employer NI -£8628 pa also the min needed for credit for the state pension

2. Take dividends. £2K tax free. Lower rate tax payer – 7.5%. Higher rate tax payer – 37.5%

3. Reward family with salary and dividends as long as they are a shareholder too

4. Pension contributions qualify for either employer or employee tax relief

Can make contribution of up to £40K pa

Tax effective up to about £1M – you can withdraw from pre-tax profits

For IHT planning, a pension is treated far more favourably than company shares

Pensions are a great way of saving on corporation and income tax

5. Electric cars get a large benefit from April 2020

6. Health insurance – entitled to 1 health assessment per year. Make sure that you are fit and well. No limit on what this can cover.

7. Relevant life insurance policies. These are left to trust, and therefore beneficial on IHT purposes. Important for property investors as we have a lot of debt and we need to make sure this is all taken care of to make life simple for future beneficiaries

8. Bicycles. If used for work transport. No BIK

9. Trivial benefits. Up to £50 per item up to max £300 pa. Spa treatments. Meal out etc

10. Phones and laptops used mainly for work.

11. Interest loaned into company . Personal savings allowance. £1K tax free lower rate tax payer. £500 tax free as higher rate tax payer. You get tax free money and also save on corporation tax

Better off taking the money that is loaned into the company out of the company rather than taking out income or dividends – it is tax free

12. Directors loan ISA

13. Tax free loan of £10K – this needs to be paid back at the end of the year

14. Education that is related to the work that you are doing

15. £208pa home office allowance

Are there any other things I’ve missed? What else have you done legally to reduce your tax burden?

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