5 Ways To Avoid Tax As A Property Investor!
I mostly talk about how to make money as a property investor. However, a lot of people ask me about the tax and how to save money. Generally, my rule of thumb is to ‘make' money and not worry about spending it because people worry so much about paying taxes that they avoid making money at all. Now, we do not want to do that!
In this blog, I’m going to talk about how to avoid paying tax as a property investor. Before we begin, I’d like to make it clear that tax avoidance is different than tax evasion. Tax avoidance is when you comply with government rules and ‘avoid' taxes that you can by working smart. Tax evasion means that you don't pay the taxes that you should.
Now that that's clear let's get to our topic!
Claim All of Your Expenses
The number thing you need to do to avoid tax is to claim all of your expenses. Keep all of your receipts whenever you pay for something. Many entrepreneurs make the mistake of never claiming their expenses at all. Guess what, when you keep all of your receipts, you can claim it back!
I ask my students who pay thousands of pounds for my training if they want the receipt for it. Usually, they tell me no. However, I remind them, as part of my training, that they SHOULD ask me for the receipt as they can claim this money. For instance, when you're paying for education, the tax is deductible. If you learn deal sourcing from my company, and then start your own deal sourcing and make a profit out of it, you can claim the expense!
Stamp Duty
Every single time you buy a house, you have to pay stamp duty on it. Now, this is a little inconvenient way for the government to make money out of you.
How can you avoid the stamp duty? I’ll tell you!
The way you can avoid stamp duty is by buying a property that is inhabitable, one that has a broken kitchen; it doesn't have a working bathroom, no insulation, etc. When you buy a house like that, you don't have to pay stamp duty on it! Of course, check with your accountant before making such decisions, as well as the rules of HMOs where you can find such deals.
Serviced Accommodation
The third way the government taxes you are through Section 24, where you can't even claim your mortgage payments as tax-deductible. The way to go around this is to buy a property with serviced accommodation. When you buy a property with serviced accommodation, you get massive tax advantages, and Section 24 does not apply to it. Same as if you buy a property through a company.
Capital Gains Tax
This is when you buy a house, it goes through an appreciation, and then you sell the house. The profit you make on this appreciation is called the Capital Gain, and the tax you pay on it is called Capital Gains Tax.
How do you make your way around that, you ask? By living in it!
When you buy a house and live in it, you avoid the stamp duty. Then you make the house beautiful, and you sell it. The profit you make on this sale is not eligible for Capital Gains Tax.
Get Yourself a Good Accountant
Now, I'm not a tax consultant; I'm only giving you advice from my own experience. Therefore, I highly recommend you get yourself a good accountant that understands property investments and your specific business. The one who understands your business and your goals is bound to give you the best suggestions!
A Final Word
These were my five tips to avoid taxes as a property investor. If you want more information on property investments, check out my YouTube channel where I give valuable advice on investments and the tips and tricks to make good money out of it. If you're interested, you can register for my crash course on Property Investments for only a pound!
