Tips for managing multiple rental properties

While some landlords are skilled at monitoring multiple properties simultaneously, others may face new challenges. Managing an expanding property portfolio can be demanding and leave you feeling overwhelmed.

For landlords with multiple residential investment properties, optimising profitability and handling tax obligations efficiently is crucial. By implementing effective planning, organisation, and establishing a robust support network, success is within reach.

Read on to discover our tips for managing multiple rental properties.

Purchasing a property

Property ownership

If you own the property with a spouse or business partner this means you will split the income, costs, profits and taxes. You can own a property either as:

• Direct ownership
• Joint venture
• Partnership

In all three options, profits are shared and taxed at income tax rates, with capital gains tax being applicable when the property is sold.

Incorporation

You can own a property through a company and pay corporation tax instead of income tax and capital gains tax. The main corporation tax rate is 25%, with a lower rate of 19% for businesses with profits £50,000 and less. Companies with profits between £50,000 and £250,000 qualify for marginal relief, learn more here.

The corporation tax rate is lower than the income tax rate and individuals will pay taxes on income they receive from the company as dividends or salary.

Keeping a property in a company for tax reasons may not be advisable. This is especially true if you plan to use the money for your personal income.

If you own several properties for a long time and don't need to take money out often, talk to an accountant. They can help you choose the best way to set up your property business.

Having a shareholding structure with multiple share classes given to family members is possible. This means dividends can be paid at different rates to different shareholding groups and can be advantageous from a tax point of view, as well as on the sale of properties.

Annual Tax on Enveloped Dwellings

Companies that hold higher value UK properties are subject to annual charges. The Annual Tax on Enveloped Dwellings (ATED) rates apply for properties valued at over £500,000.

Stamp Duty and Land Tax

The following rates may vary if the property(ies) are owned by a company and non-UK resident landlords may pay an additional 2% surcharge.

In England and Northern Ireland – Stamp Duty Land Tax (SDLT)

If you purchase a residential property, or part of one, worth £250,000 or more, you’ll need to pay SDLT. When you buy a residential property for more than £40,000 and already own another residential property, the rate of stamp duty is higher, usually by 3%.

Multiple dwellings relief was previously available on the purchase of multiple properties in a single transaction. This is set to be abolished from 1st June 2024.

You can find details of further exemptions listed here.

You can find more information about Stamp Duty Land Tax reliefs on the Government website.

In Scotland - Land and Buildings Transaction Tax and Additional Dwelling Supplement

Land and Buildings Transaction Tax (LBTT) applies to property transactions above £145,000 in Scotland. The Additional Dwelling Supplement (ADS) is an additional charge for second properties - including buy-to-let investments - and a charge applies on purchases above £40,000.

You can find more information about charges, reliefs and exemptions here.

In Wales – Land Transaction Tax

If you purchase a residential property at over £225,000 you may have to pay Land Transaction Tax (LTT). If you already own one or more residential properties and decide to buy an additional one for more than £40,000, you may need to pay the higher residential rates.

Information on exemptions and reliefs can be found here.

Stamp Duty and Land Tax on corporate bodies

Companies and partnerships with a company as a partner must pay higher rates for various taxes. These include Stamp Duty, Land Tax, Land Transaction Tax, and Land and Buildings Transaction Tax.

However, relief can be available for:

• properties qualifying as rental businesses
• properties purchased for development or re-development and resale in a property development trade

Where relief is eligible, the rate applicable is the higher rates as detailed above for multiple properties whether or not the purchaser owns another residential property.

You should speak to a solicitor for more information.

During the rental period

Where properties are owned by individuals, property profits are subject to income tax and you’ll need to report income and expenses on your tax return. Having multiple properties will likely increase your profits, resulting in a higher tax liability. You must record on your tax return how many properties are included, and give the address of each property. Here are some things to consider when taking on additional properties to your portfolio:

Losses

Any property losses are carry forward to offset future profits from the same property business. Generally, individuals cannot use property losses against general income.

You can group properties together so losses offset against other properties with profits in the same period.

Online software

Advances in accounting software and applications have made huge steps in making your property business more efficient. Software can store property and tenant details and documents online. This can help you comply with Making Tax Digital for Income Tax Self-Assessment. 

If you own multiple properties using online software can help automate tasks like tracking income, expenses and performance.

Making Tax Digital for Income Tax Self-Assessment

Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is due to be introduced in April 2026 for landlords earning more than £50,000 from property and April 2027 for those earning over £30,000.

Landlords need to ensure they are ready and implementing MTD compliant software is the first step. Thereafter, ensuring you send the required quarterly updates to HMRC and meet any end of year obligations is essential.

Not all the MTD for ITSA guidelines have been prepared but HMRC published some guidance for landlords with jointly owned property. The following are assumptions: 

• landlords have to option to submit expenses annually
• landlords can keep less detailed digital records to simplify the transfer between joint owners

Landlords with property held by companies won’t need to comply until the MTD for Corporation Tax scheme is announced. 

Selling a property

Selling a property may trigger a Capital Gains Tax (CGT) liability on any gain made since the property's purchase. Principle Private Residence Relief (PPR) means that those selling their homes do not have to pay CGT if they meet certain conditions.

If you used to live in your rental property, you might get a tax break that lowers how much CGT you owe.

The rate of CGT depends on the seller's income tax band, with basic rate taxpayers paying 18% and higher rate taxpayers paying 24%.

Large property portfolios and furnished holiday lets (FHLs) can be considered a business asset and may qualify for Business Asset Disposal Relief (BADR). Qualifying for relief is difficult and several cases have lost against HMRC in court.

You must report capital gains and pay CGT to HMRC within 60 days of completion. If you are Non-UK resident you must report the sale and gain to HMRC even where there is no tax to pay.

Non-Resident Landlord Scheme

For landlords living outside the UK but renting property in the UK, the Non-Resident Landlord Scheme (NRLS) is applicable. The scheme requires that letting agents of a non-resident landlord must deduct tax from rental income and pay this over to HMRC. For non-resident landlords without a letting agent, the tenant will need to operate to NRLS if they pay weekly rent of more than £100. 

Non-resident landlords will need to submit a UK tax return, reporting their rental income and tax deducted under the NRLS.

TaxAssist Accountants can help you with your property portfolio

Let us help you to manage the taxes and accounts associated with your property portfolio. Call TaxAssist Accountants today on 0203 457 3737or use our online contact form.

Date published 14 Mar 2024 | Last updated 30 Apr 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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