Business or Investment?

[vivien24]

Hi everyone, I'm new to the forum and look forward to getting involved!!

First question - My husband and I own 4 unfurnished rental properties in the UK that provides a reasonable income .

We are both recently retired and have always completed our self assessment tax returns just showing our income from these houses individually as investment income.

Would there be any tax advantages in classing ourselves as a business instead? ie can we then pay ourselves a salary, claim for a car etc or is that self defeating?

At the moment we are liable to pay capital gains tax on any property we might sell, classed as a business does that alter?

We use a management company to manage our rentals for us so obviously we claim back all their costs, plus all expenses etc but, as we now have pension income also, we will be due to pay quite a lot of tax and I am looking at ways of reducing this.

Thanks in advance:)

[Richlist]

We are both recently retired and have always completed our self assessment tax returns just showing our income from these houses individually as investment income.

You should be submitting your rental income on the land & property self assessment forms not as investment income.

Would there be any tax advantages in classing ourselves as a business instead? ie can we then pay ourselves a salary, claim for a car etc or is that self defeating?

You can already claim for the use of a car but you will normally find that claiming the £0.45p mileage allowance works out better for you.

You could form a limited company but you would have to sell all the properties and the limited company would have to purchase them so......you would have to pay selling & buying costs, SDLT, any CGT due, and you would need new mortgages etc.....hardly worth the effort.

At the moment we are liable to pay capital gains tax on any property we might sell, classed as a business does that alter?

See note above

we will be due to pay quite a lot of tax and I am looking at ways of reducing this.

1. Ensure you claim everything you are entitled to.......most people don't.

2. Get an accountant

3. Plenty of self help books available.....I recommend - 'How to Avoid Property Tax' by Carl Bayley (about £25 on Amazon)