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Property taxes

Property taxes

Examples of hidden cost of buying a house


Buying a house can be very expensive. The most obvious cost of buying a house is the actual price of the property. Most buyers get into conveyance with only this cost in mind. They fail to realize that there is one or more other hidden cost of buying a house. The result is that the buyer is confronted with bills he did not expect. The worst thing is that these additional expenses have to be paid from the buyers own pockets and not with loans or mortgages. It is important for any buyer to get into conveyance with sufficient knowledge of the expenses he will have to cater for.

Solicitors Fees

The very first cost of conveyance that you will be confronted with is the solicitor’s fees. Solicitors’ fees are payment made for the services of solicitors. Solicitors are experts in real estate transaction. They help buyers and sellers in exchanging properties. Property transaction cannot sail through smoothly without the input of solicitors. They help buyers and sellers draw contracts, perform property investigations and file relevant documents. They usually charge about 800.

Disbursement Fees

Search and Surveys Fees

The other cost of conveyance is the cost of property survey and valuation. Property survey help elucidate the cost of a property. The survey takes into consideration size, location and age of the property. A buyer cannot get a mortgage without having a valid property survey report. There are many types of survey reports. Each of these serve a different purpose and cost different amount of money. The most important one is the Standard Property Survey. It gives a brief account of the condition of the property and the possible market value of the property. The law requires that a buyer conducts at least the Standard Property Survey.

Land Registry Fees

As a new owner of the property, you need to change the legal ownership of the property at the Land Registry. Only after completing the process you will own the title dee of the property. You will need to fill up forms and pay the required land registry fees to make the transfer of deeds complete.

Stamp Duty Tax

Stamp duty land tax is the other hidden cost of conveyance. Stamp duty is like an income tax. Strangely, it is charged on the buyer rather than the seller who is indeed the recipient of the price of the house. Stamp duty is charged on any newly built residential home that is worth more than £125,000 or any other property that is at least £40,000. That is, if you are buying your first home, you will be charged a tax when your home is at least £125,000. If the home you are buying is the second or subsequent home, or when it is a buy to let property, taxation begins at house prices of £40,000. Stamp duty taxes, like income taxes, are grouped into various bands with each band having a different rate. The higher the price of your house, the more stamp duty you will have to pay.

Other Fees

You should also expect to pay mortgage arrangement fees. These are the cost of processing a mortgage. Mortgage arrangement fees vary from one lender to the other. Some of these lenders have refundable arrangement fees while others do not. The arrangement fees include mortgage application fees, mortgage broker fees and mortgage transfer fees. Other conveyance fees include estate agent fees and life insurance processing fees.

Tax for landlords made easy


Taxes are always a headache. They are difficult to understand and pay. Unfortunately, they have to be endured by anyone who earns an income. The tax for landlords are those taxes that are levied on every income that a landlord makes. Rental properties are viewed as a source of revenue just like any other jobs. Therefore, they must be taxed. The rate of income tax on rental properties has been changing in the past few years. Keeping up with the changes can make these taxes difficult to understand. What a landlord needs to know is the tax group that he is placed in every year. This is what underlies your obligation as a taxpayer.

When and How to start planning taxes?

Payment of tax begins right when you start renting out your property. You must tell the HM Revenue and Customs (HMRC) that you are renting your property. Because if the complexity if landlord’s income taxes, you may not know that you actually own the HMRC some taxes. This usually happens to new owners who build their properties and start renting them out without consulting the HMRC. HMRC will take legal action against you if you start renting without paying taxes. It is important for a landlord to consult the HMRC whenever he realises that he has not paid taxes since he started renting out his property. The earlier you make contact, the more chances are that the HMRC will let your fault slip. Otherwise, if he HMRC finds you renting out an untaxed property, they may charge you some penalties.

Levels of Taxation

The most important thing that you need to know is the tax bracket you are in. Every income above a given amount is taxable. Once your income reaches a taxable income, you should expect the HMRC to knock on your doors. Even taxable incomes are grouped into levels. There are three levels of taxation. Each of these levels are determined by the amount of money that a landlord makes from his property. The more you make, the more taxes you will have to pay.

The very first level of income tax is the basic income tax. This is just a step higher than personal allowances. Personal allowances and tax reliefs are other complications of taxation that you will need to know about. The basic tax is the tax that is charged on a landlord who earns anything between £11,000 and £43,000. Tax charged on any income owner income that falls within this level is 20% of the income. An owner who earns £30,000 will be charged £6000, and £8000 for the one who makes £40,000. All these rates fall within the 20% tax rate and attract a tax of 20%. The 20% rule applies to all landlords earning incomes that fall within the basic tax rate.

The other two rates of taxation are the higher rate that attracts 40% tax and the additional rates that attract 45% tax. It is important to know which tax rate you fall in. You should also know of tax allowance that the HNRC can give you.

What you need to know about home renovation insurance


Home renovation insurance protects homeowners from the risks that are associated with improving a home. Home improvement is a duty that every owner must undertake from time to time. This responsibility is felt more by freeholders. Freeholders are expected by law to perform major home repairs such as the construction of roofs, strengthening of pillars and insulation of walls. These tasks carry their own risks. Homeowners usually focus their minds on improving their homes rather than the potential risks that can befall the house during improvement. A home is usually very vulnerable during improvement. Its foundations are weak, its roofs are leaky, and it is open to people who cannot be fully trusted. That purpose of home renovation insurance is to protect homeowners from financial losses that come with home reconstruction.

Why do you need home renovation insurance?

Buildings, especially houses, can easily catch fire during renovations. Houses are usually supplied with gas and electricity. These are the biggest fire hazards. Workers may ignore gas leak warning signs or encroach on electric fuses that are easily short-circuited. A pole of brick may also cut electrical wires and cause fires. Some tools that are used during home renovations are other potential causes of house fires. One of these is the welding machine. A welding machine carries highly inflammable gases and produces thousands of degrees of heat. The smallest carelessness in the use of a welding machine can cause dangerous fires. A standard fire insurance cover does not protect property from those fires that occur during renovations. These have to be insured separately if the owner wants to be in a peace of mind during the renovation of his home.

What do home renovation insurance cover?

Houses are in danger of destruction from natural causes during renovations. Roof repairs leave ceilings and tiles at the peril of wind. High winds can easily blow off a roof that is only partially covered. A partially covered rooftop offers resistance to the flow of wind. This resistance leads to a build of energy that eventually causes the roof to be blown off. Rains may also cause discoloration of ceilings and rusting of the home appliances that are made of iron. These are events that are never preplanned by homeowners. The owners usually focus on repairing a given structure without giving much regard to potential collateral damages of other structures. Insurance firms have come up with various covers for damages that are caused by natural disasters. Winds and rain are just examples of these disasters. Others are floods, earthquakes and landslips.

Homes that are being renovated are usually very open to thieves and vandals. Even the workmen themselves cannot be totally trusted. They may be tempted to steal a thing or two from the house. The last thing on a home owner’s mind is losing his properties when he is doing home renovations. The homeowner expects everything to be better after repairs, and not be accosted by expenditures that occur because of theft. There are insurance policies that will protect you from the financial losses caused by theft during a home renovation.

How the council tax band works


Tax bands are groupings in which properties are assigned for taxing purposes. Each tax band is a range of values that represent house prices as they were in the open market on 1st April 1991. All these houses must be domestic houses and not business premises. The grouping of houses is done by the Valuation Office Agency (VOA). These values are used by the Council Tax bands to determine the tax that is chargeable on a property. There are eight groups in the council tax band of England. Each group is assigned a letter from A to H.

Valuation Office Agency

The Valuation Office Agency is in charge of grouping properties into the different tax band. They do this when asked or during council tax challenge. The VOA also assesses properties that are made bigger or smaller, as well as those properties that are newly built. Newly constructed properties, regardless of when they are built, are subjected to the same tax groupings as those proposed in 1991. Other than the 1991 real estate market values, properties are also assigned different values depending on their location, layout, character, change in use and location.

Council Tax Band for HMO

Houses in multiple occupation (HMO) may or may not be treated as other houses. If an HMO house has individual units with every unit having its own originally built facilities, then it will be addressed as a single occupation and banded differently from other units in the property. HMOs that have been modified are treated entirely differently. If an HMO was originally designed to house many people but later modified to have separate units, it may be treated differently. It will be considered as a single living quarter when occupants share social facilities such as kitchens and bathrooms. HMOs that were banded as a single unit but now have kitchenettes, small toilets and bathroom facilities are also still grouped in one band.

Some principles of council tax bands for HMOs apply for home annexes. Annexes are living quarters that are attached to property. If one original house has been modified to have fully furnished living quarters, the new house can be grouped into two different bands. The decision to group it in two bands is made by considering how the annexe looks like and how it is used. If the annexe has the physical characteristics of a full house, the new property will be in two bands.

The new house will be in one band if the annexe is only used as a basic living quarter. That is to say that it is not how the annexe is used that determines the band it will be placed in but the kind of physical facilities that it has. If it has a fully furnished kitchen, toilet, bathroom and a living room, it will be assigned a band separate from the original house. If the facilities are only used for convenience, it will be considered part of the original house. Annexes are usually constructed to accommodate a growing family or when a relative comes to visit. 

Calculating capital gains tax on rental property


Rental properties are subjected to tax like any other commercial enterprises. If you had a rental house and moved out of it, you may choose to rent it out or to sell it. The law is very considerate for homeowners. Owners of flats are assumed to be of moderate financial incomes and are therefore not pushed to the wall by tax and revenue authorities. Those who move out from flats are given a relief period during which they can either rent out their flats or sell it. If they rent out their apartments, they will not be subjected to capital gains tax on rental property.

If they sell the flat, the profit they make may or may not be subjected to taxation. Tax relief is granted to those who sell their properties within a certain period of time since moving out. The period is commonly referred to as the “private residence relief final period exemption”. Sale of property after this time period is believed to be premeditated and is subject to taxation by the HM Revenue & Customs (HMRC). The period of tax relief was 36 months before 6 April 2014. It has been changed drastically since then. The time period remains the same for people who are disabled and those who move into residential homes for care.

How are gains on the sale of a rental flat calculated?

Gains on sale of a rental flat is calculated based on several factors. Most of these factors are reliefs that reduce the amount of tax that is charged on the sale of the property. They are reliefs that are granted by the HM Revenue & Customs to the seller of the rental flat. These reliefs include the private residence relief and rental relief. Private residence relief is a tax relief granted to those who move from rental flats to private homes. It is a token of appreciation for growth from flat ownership to residential property ownership. Rental reliefs are given to those who rent out their flats before selling it out.

The reliefs are included in the calculation of the net profit on the sale of property. Profit on sale is basically the difference between the amount f money lost in the purchase of the property and that gained from the sale of the property. Reliefs and expenses must be put into consideration when calculating net profit. The expenses that are expected in property sales include legal fees, stamp duty, and the cost of renovating the property.

Calculation of private residence relief is a bit complicated. Remember that the legally stipulated relief period is 18 months. To get private residence relief, you must add the number of months you lived on a property to 18 months. You then divide this sum by the total number of months you owned the property. The numerator and denominator of this equation may seem to be the same but are in most cases very different. An individual who lives in a property for two years and sells it after three years of moving out will have owned the property for 60 months but only lived in it for 24 months. The numerator is 24 added to the 18 month relief period. That is 42 months. The denominator will be the 60 month period of ownership. This is basically how net profit on property sale is calculated. 

The additional/extra expenses of conveyancing except the solicitor’s fees


In conveyancing there many additional costs except the conveyancer’s fees. You need to be acknowledged about these expenses. Purchasing or offering property is a critical money related exchange. Since it is such an included procedure, most people will decide to contract experts to help them along the way. This incorporates some mix of land operators, conveyancers, specialists, bookkeepers, building monitors, and budgetary organisers. Venders will likewise need to consider the expense of enlisting a land operators. It's best to contrast solicitor’s charges and capabilities with settle on a choice.A specialist or conveyancer will charge you a blend of expert expenses, alongside distributions. These incorporate both settlement expenses and the charges for pursuits that are performed for your property's sake. Yet there may additionally be different sorts of required charges to be mindful of, which are vital to arrange ahead for.

Expense of Transfer /Stamp Duty

The buyer or transferee is in charge of paying a stamp obligation. This expense is imposed on most property exchanges by the suitable State or Territory Revenue Office. The rate will rely on upon the domain or state the property is situated in. This rate will likewise be impacted by the price tag or property estimation. The purchaser's specialist or conveyancer will have the capacity to compute the amount of stamp obligation is owed, and can prompt you in regards to any potential concessions. In the event that you hold a perceived concession card, you may be qualified for the concessional stamp obligation subsequently.

Legitimate search cost

There are other costs for legal searches. Also solicitor’s expenses are debatable. It is prudent to analyse the expenses being charged by a couple of diverse specialists. Purchaser's are likewise encouraged to embrace title and government seeks which will bring about extra expenses on top of the conveyancing charges.

The issue of Exchange Fee

The buyer is additionally in charge of paying a Transfer Fee to the applicable Land Office, contingent upon the domain or state the property is situated in. The measure of this expense will likewise rely on upon the area, the property estimation, and the price tag. Be that as it may, the Transfer Fee is typically topped at a certain sum. On the off chance that you have come to that measure of home estimation, you will pay the topped charge rate regardless of what the property is really worth. Similarly as with the Stamp Duty, the specialist or conveyancer can give you exhortation in regards to the exchange charge.


Purchasers can make their agreement of offer restrictive on the premise of a tasteful building and vermin review report from an authorised proficient. The expense of these can fluctuate.

The issue of Bank Fees

Both purchasers and dealers can hope to fight with bank expenses on the off chance that they are working with a money related organisation. Case in point, in the event that you are purchasing a property and are taking out a home loan to help finance this buy, you can hope to pay application expenses, settlement charges, and legitimate expenses. You'll need to peruse over the budgetary organisation's advance offer painstakingly before you sign any records. These ought to plainly diagram the expenses that you will be considered in charge of. Keep in mind that there may be expenses both after marking the credit records and in addition all through the lifespan of the advance.

Vendor’s bank fees issue:

Vendors will likewise need to work bank expenses into their financial plan. You may be in charge of release expenses, as a begin. Dealers who are paying out the advance early will likewise need to conceivably pay early leave charges. Make certain to figure out every one of the insights with respect to what you are relied upon to pay, on the off chance that you must pay off your advance sooner than you had been arranging.

Area TAX

Area assessment is an expense on freehold land. For area duty purposes, "area" incorporates:

Empty area, Land that is based on, Parts in building unit arranges, Parts in gathering title arranges, Parts in a period offer plan and Parts claimed by a home unit organization.

Area expense is evaluated on the assessable estimation of a proprietor's aggregate area property. The assessable worth will be the aggregate estimation of area, less any exceptions asserted.

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