Pay Less Property Tax with Serviced Accommodation.
In this blog, I’m going to be talking about how to save tax through the strategy of Serviced Accommodation, which, by the way, is an excellent strategy in property investment.
Over the years, I've built a huge property portfolio, closed hundreds of deals, trained thousands of people, and have written the best-selling book ‘Buy Low Rent High.'
The government has been shocked by Serviced Accommodation. They are wondering why seven percent of houses in Greater London is SA, and the reason is that the government has crippled landlords with stupid tax rules. They upped stamp duty!
Previously, when someone bought a house, they didn't need to pay stamp duty for it if it was less than a hundred-and-twenty-five thousand pounds. Easy, right? You only needed to find houses costing less than that, and you wouldn't be eligible to pay stamp duty.
Now, the government has changed it so that if you bought a house for forty-thousand pounds, you would need to pay stamp duty. And that too, three percent! So, if I were paying someone a hundred-thousand pounds, I’d be paying three thousand pounds on stamp duty!
In 2016, they had announced they would bring in Section-24 in 2020. I was crossing my fingers that they didn't do it, but they did. Now, Section-24 says that you can't claim your mortgage payments as tax-deductible. So, if you were renting a house up for five-hundred pounds, you pay a mortgage of three-hundred pounds, you make a profit of two-hundred pounds, right? NO! They're saying you have to pay tax on the whole five-hundred. This has never happened in the history of any business!
Next, you’re making a little bit of money through property, isn’t it great? But then your boiler breaks, and you have expenses.
Serviced Accommodation Tax Benefits
Let me talk about Serviced Accommodation.
If you’re buying a property, and it’s going to be SA, they say it’s a commercial property, you pay a commercial tax, which is much, much less. So, that’s the first advantage.
Next, Section-24—the stupid law that said you couldn't claim your mortgage as tax-deductible—does NOT apply to serviced accommodation. So, if you're renting out the property for short stays, you can't claim back your mortgage as tax-deductible, which is fantastic! This is why so many landlords have converted their buy-to-let to SA, or their HMOs to SA because it saves them the taxes!
Capital allowances: when you buy a new boiler for the property, or any other thing, as long as you’re renewing, repairing, or replacing it, it is completely tax deductible with capital allowances.
Listen, I’m no tax expert, I’m not qualified to give tax advice, but this is what I would say:
- Challenge your accountant on everything! Educate yourself about things, and when your accountant tells you anything, look it up to see if that's the only way to do things.
- Consider SA as a strategy because it brings in great cash flow and has tax benefits.
- Research, study and educate yourself. Do not just take the easy road. Do not just do what everybody tells you to do.
A Final Word
I hope you liked this blog, and I look forward to getting educated about Serviced Accommodation. For more information regarding SA and other property strategies, visit my YouTube channel!
Find the next Serviced Accommodation webinar at: https://www.samuelleeds.com/…
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