Often people enquire about what are the ways or tips that can help to avoid paying tax on rental income, the simple answer to this is that of course there is no straight way of doing that. However, if you want to struggle with a huge amount of hefty fines and a long period in prison, you can definitely give it a try. This can lead to a situation where you will have to pay the full amount of tax but also the interest and penalties with it for trying to get involved with tax fraud.
Moreover, this strategy will not be recommendable by any professional advisor. A little change in the question and wondering whether or not it is possible to figure out ways that can help to reduce the income tax in your rental income can be subject to discussion. This comprehensive discussion will help you to get an idea about the tips to avoid paying tax on rental income which involves how keeping the tenants for a short period can help, extending your party for the sake of extending it will help and efficient planning of payments will also be helpful in this regard.
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What are the Tips to Avoid Paying Tax on Rental Income?
It is considered to be a complicated task to file tax returns every tax year and often people enquire about ways to reduce tax bills. This is imperative to know here that you should be finding smart ways that can help you to be tax efficient rather than to be involved in illegal ways that are against the tax law in the UK. This can lead to serious and unfavorable consequences if you are found to be guilty of involvement in such an act. We have outlined a few ways that are popular to be tax efficient and will be fruitful to read in this regard.
1-Invest in Your Property and Reduce Tax by Extending
The best way that will help you to avoid the hefty payments of the income tax on your rental income is to invest in your property. Not only the market value of your property will increase but also the stamp taxes will be reduced in such a scenario. As per the recent changes in the rules created for the property, you are allowed to extend your property more than the limit it was allowed with the old rules.
Moreover, this will become a way to increase your mental income as well. You will be getting some real benefits once your property is grown and expanded. However, there are certain rules and regulations to be followed in order to occupy the area in the location your property is existing.
2-Tenants for a Short Period of Time
If you are a landlord who is dealing with tenants for a short term, there is a chance that it will help you to reduce your tax bills. The amount of money that you have spent on expenses like utilities and council tax can be claimed considering this short-term period. However, people are more interested in more earnings than saving their money. A short-led void is also helpful to generate more income in this regard.
In the case of tenants who are living for a long period of time. This is usually a period of more than a year. The rental income is fixed in this case and the increase is not possible before the agreed time mentioned in the agreement between the owner and the tenant. The maintenance and repair are also not done before the fixed time and this can result in bearing huge expenses for the owner.
3-Keep Efficient Planning of Your Payments
It is considered to be one of the tax-efficient ways to reduce the number of bills that you make the payment like income tax before the deadline approaches. This will keep you protected from any extra payments like fines and other late payment penalties. The earlier you will file your tax return the faster you will get it. When you become an early bird, this allows you to have a good check on the rough calculations and the mistakes can be rectified before time. So it is important for the owners to file the tax return without having to wait for the deadline and keep themselves away from extra payments like fines and penalties.
The Bottom Line
Now that you have gathered a fair amount of information about how to avoid paying tax on rental income in the UK, we can bring the discussion towards wrapping up. There are several tax-efficient ways that allow you to reduce your tax bills and help you to be away from the huge amount of penalties, fines and other extra payments. The owners should get the tax bills cleared without having to wait for the deadline to approach. Efficient tax planning is the only way that is suggested by professionals.
However, if you seek other ways to reduce the tax bills, you can be caught if found guilty of some illegal actions against the tax law of the UK. So it is better to be tax efficient rather than find ways to escape from this responsibility. We hope these few minutes of reading have helped you to develop a better understanding of avoiding paying tax on rental income and how it is beneficial in the UK.
Avoiding paying tax on rental income becomes tricky when you have a higher chance of making an error in your tax returns. Our professional and detail-oriented professionals can help you!
Disclaimer: All the information provided in this article on how to avoid paying tax on rental income in the UK, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.