Second homeowners and buy-to-let landlords are being targeted by HMRC for undeclared Capital Gains Tax. Apparently some people who own holiday homes and rental investments are not aware that Capital Gains Tax is normally payable on any gain they make if they sell it at a profit. As with every area of tax law this is a complicated area but the basic rule is clear-if in doubt speak to your accountant! You do not normally pay CGT if you make a profit when selling your residence but it is normally payable on second homes and buy-to-lets.
As well as those who are genuinely unaware of the tax there appear to be many who try to evade the tax simply by failing to disclose the gain to HMRC. It is always best to come clean to the authorities as soon as possible- far better to come forward voluntarily than wait for them to track you down.
Our landlord insurance clients will agree that a good accountant is a very valuable member of your team. He or she will not only help you with possible CGT. Landlords need to keep very careful records of all their income and expenditure and they need to be aware of the expenses that can be claimed against their taxable income and those that cannot. This is an area where expert help can pay dividends. If you use a good managing agent you should find that their records will show exactly how much rent you have received but there is also the question of proving how much you have spent on the property yourself.
Many people go into the buy to let business to provide themselves with a pension. They hope that by the time they retire they will have paid off any mortgage and they will have a valuable asset plus a rental income. They need to be aware of the taxation treatment of different types of property investment compared to conventional pensions.