As the end of the tax year approaches, it’s time to review your property related finances, ensuring you are maximising reliefs and planning opportunities for property owned as an individual or business.
Year End Tax Planning for Property (2024/25)
18 February 2025
Company Owned Residential Property
Owning residential property through a limited company is a popular choice among landlords, as it can offer both short-term and long-term tax savings and planning opportunities.
However, it is important to be aware of potential tax compliance pitfalls, which could result in significant tax liabilities and penalties if compliance requirements are not met.
Stamp Duty Land Tax (SDLT)
When acquiring a residential property worth £500,000 or more, the default rate of SDLT is 17%. This 17% rate is known as a ‘slab rate’ as it applies to the total consideration with no incremental thresholds.
Annual Tax on Enveloped Dwellings (ATED)
The ATED regime applies to residential properties valued at more than £500,000 that are owned by certain non-natural persons, such as limited companies.
If ATED applies to your company, the annual tax payable starts at £4,450 and can rise to as much as £292,350 at the maximum rate.
SDLT and ATED Reliefs
The conditions to obtain relief from the SDLT ‘slab rate’ and ATED are complex and require specialist knowledge to navigate.
It is important to note that HMRC is particularly active in these areas, and we are seeing an increase in the level of HMRC compliance checks where relief claims are made for both SDLT and ATED purposes.
Importance of Getting the Ownership Structure Right
Implementing the ownership structure from the outset is crucial to avoid unnecessary tax liabilities and complications. Proper planning can save you significant costs and ensure your investment is structured in the most tax-efficient way.
De-enveloping Properties
In some cases, “de-enveloping” – the process of transferring property out of a corporate structure – may be a viable option to prevent ATED implications and better suited to your long-term intentions. However, this process requires careful planning to ensure it is done correctly and in compliance with tax regulations.
Stamp Duty Land Tax (SDLT)
Multiple Dwellings Relief (MDR) abolished
As of 1 June 2024, MDR has been abolished. However, the “6 or more rule” still applies, allowing purchasers of six or more dwellings in a single transaction to benefit from the lower non-residential SDLT rates. This can provide significant tax savings for qualifying transactions.
Mixed-use property transactions
The disparity between SDLT rates for mixed-use or commercial property transactions and those for residential transactions has grown significantly, with a difference of up to 14% in some cases. It is crucial to determine whether a purchase qualifies for non-residential SDLT rates, as this can have a substantial impact on the overall tax liability.
Properties unsuitable for use as a dwelling
Properties that are unsuitable for use as a dwelling benefit from the non-residential rates of SDLT resulting in highly lucrative tax savings.
However, HMRC has reported that 95% of such claims fail to meet the required criteria. Therefore, careful assessment and professional advice are essential to ensure the correct rates of SDLT are applied to the transaction.
Property Capital Allowances
Capital allowances on non-dwelling real estate offer valuable tax-saving opportunities for businesses across all sectors. Whether you’re a commercial enterprise, a charity, or even a pension scheme, ensuring your capital allowances position is protected can significantly enhance the value of your assets.
Even for non-tax-paying entities like charities or pension schemes, safeguarding your capital allowances position is crucial. It can help you maximise the financial benefits tied to your property investments, ensuring you extract the most value from your assets.
Our team is here to support you at every stage of property ownership. From acquisition to disposal, and even during enhancement projects, we provide expert guidance to protect and optimise your capital allowances.
Property VAT Planning
Understanding VAT rates on construction works
Depending on the nature of the work, the applicable VAT rates vary significantly and may be charged at 0%, 5%, or 20%. Proper planning is essential to ensure the correct rate is applied, as mistakes can lead to costly penalties or missed opportunities for savings.
Navigating VAT for conversions, new builds, and development strategies
Different types of property projects, such as conversions, new builds, or developments intended for holding versus selling, are subject to varying VAT rules. Each scenario requires careful consideration to ensure compliance and to optimise VAT recovery where possible.
Option to Tax (‘OTT’) and Transfer of a Going Concern (‘TOGC’) planning
Effective planning around OTT and TOGC is vital for both buyers and sellers. Proper planning can mitigate VAT liabilities, reduce exposure to HMRC enquiries and penalties.
Property Incorporations and Portfolio Restructuring
Addressing finance cost restrictions
The restriction on tax relief for residential finance costs has significantly impacted individual landlords, leaving many in loss-making positions and reducing profitability. In response, many landlords are now acquiring future investments through companies or incorporating their existing property portfolios.
HMRC scrutiny and tax implications
Property incorporations and restructuring are under close scrutiny by HMRC, with tax avoidance schemes being targeted through measures such as DOTAS and Spotlight 63. It is crucial to seek advice from a reputable and regulated firm of Chartered Tax Advisers to navigate the SDLT and CGT implications of incorporating a personally owned property business. Additionally, wider considerations such as ATED, IHT, and Income Tax must be addressed to avoid unexpected liabilities.
We provide expert advice and support for all aspects of property tax, offering commercially minded solutions for the acquisition, ownership, and disposal of UK property.
Furnished Holiday Lettings (FHLs)
Upcoming Changes to Finance Cost Relief
From 5 April 2025, tax relief on residential finance costs will be restricted for non-company owners of FHLs.
CGT Relief Changes
Take advantage of the final opportunity to utilise CGT rollover or holdover reliefs to defer CGT charges when replacing assets or gifting FHL assets to the next generation. Our Private Client tax team can help you navigate potential IHT issues such as, Gifts With Reservation of Benefit and Potentially Exempt Transfers. This is the last opportunity to maximise relief for Business Asset Disposal Relief (BADR) on the sale or gift of qualifying FHL assets.
Capital Allowances and Planning
This is also the last chance to incur capital expenditure and pool capital allowances in respect of FHL. Our dedicated surveyors can assist in identifying and maximising these allowances. Additionally, it is important to review the impact of FHL changes on profit-sharing arrangements, particularly for married joint owners, and to consider pension contribution planning.
Read more from the full guide:
Private Client Tax
Find out more about reliefs and planning opportunities for your private wealth including:
- Income Tax Planning
- Investments
- Capital Gains Tax Planning
- Inheritance Tax Planning
- Residency and Domicile
Business Owners
As a business owner, it is important to consider the reliefs and planning opportunities such as:
- Owner Managed Business Reliefs
- Capital Gains Tax Planning
- Investments
- Company Owned Residential Property
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