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Poor advice leaves buy-to-let landlords at risk of high tax bills

Failure to seek expert advice is leaving buy-to-let landlords at risk of high tax bills that could have been avoidable, according to three industry experts.

In a discussion that is available to watch on video, Herschel Santineer, Ian Christlo and Harvey Harding stressed the need for landlords to get specialist advice from a legal, financial and tax perspective before making any big decisions.

“The impact of not getting a full spectrum of advice can be huge,” Herschel Santineer, advisor at Glenstone Tax Consultancy, explained. He mentioned a client had already taken advice elsewhere and had transferred his property into a limited company before coming to him to do their tax return.

“He was not all happy to find out that this had crystallised a tax liability of £300,000. It’s so important to get the proper advice before taking any big steps.”

Ian Christlo of MortgageLine Services, added: “Landlords have to plan for the future as well as for now. A limited company may appear to be the best way to invest in property now, but the implications for the future – particularly when exiting – have to be considered too.”

Borrowers are facing an increasingly difficult financial landscape as more lenders enter the buy-to-let market. For instance, some lenders require borrowers to use specific SIC (Standard Industrial Classification) codes, so access to the best finance deals may be restricted if a different code is used.

There could be further complications, as HMRC considers the SIC code when looking at how much tax to charge. With this, inexperienced landlords may find it difficult to successfully navigate these issues.

Harvey Harding, managing director of PM property Lawyers, explained that many landlords didn’t set out to run a business, so they didn’t necessarily set things up in the proper way at the start.

“The best thing they can do now is to get some expert advice to find out which options are available and then make a plan for the future,” he advised.

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