Property Capital Allowances Explained For Landlords To Save Tax
Landlords can claim capital allowances on their property rental business. Our property tax specialists often take calls from landlords that wish to understand more about property capital allowances.
Capital allowances on property transactions is an important feature for any landlord that wishes to buy property whilst maximising tax savings.
The easiest way to explain capital allowances on property acquisitions is to look at an example. When you buy a property, it is a capital asset. Surveys may be carried out on the property to see what capital expenditure is allowed in our annual investment allowance calculator. This is then used to see how much tax relief you may be entitled to.
The survey report is produced to break down the available capital allowances on your property investment and a schedule of how the tax reliefs may be applied to your self-assessment or limited company accounts.
Capital Allowances may be claimed on various types of property
Furnished Holiday Lets
Furnished Holiday lets provide excellent income from your investment and may benefit from 20% to 35% in capital allowances on the property value.
Shops & Restaurants
You may be renting out a high street shop or restaurant or running your own business in one. In either case you can claim capital allowances on the property up to 40% of the property value.
Offices & warehouses
You may be renting out an office or warehouse. You may be running your own business in one. In either case you can claim capital allowances on the property up to 35% of the property value.
Let Us Make A Capital Allowances Claim On Your Property Investment
Have you purchased a furnished holiday let, shop, restaurant, warehouse or office in the last few years?
Have you claimed Capital Allowances yet?
If you have not claimed property capital allowances please complete the below form to see if one can be made to help you save tax.
Annual Investment Allowance Limits On Property
Annual Investment Allowances or AIA is a tax incentive for property investors to buy properties to let out or use in their business.
The rate of Annual Investment Allowances has varied over the years, as you can see below
– £1,000,000 from 1st January 2019 to 31st December 2021 (extended into 2022)
– £200,000 from 1st January 2016 to 31st December 2018
– £500,000 from 1st April 2014 to 31st December 2015
The above annual investment allowances mean landlords and business owners could buy properties and claim up to the above amounts against their income tax liability, whether on their self-assessment or limited company accounts.
Our capital allowances specialists can help you maximise the tax reliefs when you buy a new property or on an existing property where claims have not been previously made.
I have not had a survey done within one year of the property acquisition. Does that matter?
If a claim has not been made, all is not lost. Our capital allowances advisors are here to help. Even though you will not benefit from the annual investment allowances, capital allowances may be claimed. There is still lots of tax that may be claimed, but it will not be set off in one year. The capital allowances claimed will be spread over several years. As we said, all is not lost.
Capital Allowances has different bands that you need to be aware of:
Capital Allowances rates
Annual Investment Allowance (AIA)
Annual Investment Allowance is the best rate to minimise your tax liability at 100% of the capital allowances that may be offset in year one of acquisition.
Main pool rate
18% tax reducing rate on single asset pools (for example, because you have chosen to treat them as ‘short life’ assets or you’ve used them outside your business)
Special pool rate
6% on parts of a building considered integral - known as ‘integral features’
Annual Investment Allowance Calculator On Capital Allowances
What are the tax reliefs from capital allowances?
It is possible to secure tax relief from 20% to 35% of the property value. Here is an annual investment allowance example:
Fred buys a Furnished Holiday Let in Devon for £300,000. He buys the property and then contacts one of our capital allowances experts to see how much tax may be saved. The following week, a survey was carried out to identify £90,000 worth of capital allowances. Fred could claim all £90,000 against his property income in that year as the property was purchased in the same year as the survey, allowing him to benefit from Annual Investment Allowances (more on this later).
Fred only had £30,000 in rental profits made in the year. What happens to the remaining £60,000?
The Annual Investment Allowances, also called AIA, creates a loss for Fred. This loss may be carried forward until it is fully used. This is an excellent way that you and Fred can save tax whilst benefitting from the income generated from property investments.
Tell us about your property investment so that our capital allowances advisors can see how much tax you can save