A third of landlords have their head in the sand when it comes to financial planning
More than a third of landlords are failing to properly plan for the future, according to new research from the NRLA.
Data from our quarter four landlord survey shows more than a third have not considered their future inheritance tax (IHT) liabilities – something that could lead to hefty tax bills – with the figure rising to 43% for landlords letting property in London.
According to the research nearly a tenth say they will take no action on their estate and will leave it to their heirs to sort out – a figure increasing to 14% for landlords over the age of 65. Just 20% of landlords are seeking advice on what to do about future IHT liabilities.
It was announced during last November’s Autumn Statement, that the threshold for paying IHT will be frozen at £325,000 for another two years until April 2028.
This means an increasing share of estates will potentially be subject to inheritance tax, which is currently set at 40 per cent.
While the NRLA cannot give financial advice, we would encourage landlords – particularly those who have built up significant assets – to seek professional advice when it comes to succession planning, to get a full understanding of how the tax works, and how you can best plan for your family’s future.
This will help protect your business for the next generation – something you can find out more about in our Inheritance Tax, Wills and Probate course.
Moubin Faizullah-Khan, is the founder and chief executive of property investment platform and NRLA partner GetGround, and said the figures are worrying.
“We know how hard landlords work to build profitable businesses and therefore it is concerning that so many have not considered their inheritance tax liabilities - particularly in London, where property values can make IHT exposure even more significant,” he said.
“Leaving these issues unaddressed could mean that heirs face hefty tax bills, forced sales, or the need to dismantle carefully built portfolios just to cover costs. They risk not being able to pass their hard-earned wealth to the next generation and even in some cases potentially passing a financial burden instead.”
He said there are a range of options open to landlords, for example structuring property investments through limited companies, which allows for more flexible estate planning, smoother transfer of ownership and potentially reduced IHT exposure.
Another option is to make gifts of properties during your lifetime, to reduce the size of the estate that is being handed on.
However, we would stress the best approch for you will depend on your individual circumstances, so it is always best to take professional advice.
How do I find out more?
The NRLA has a number of resources for members when it comes to financial planning, with our award-winning Training Academy offering a range of courses on finance and tax including the Inheritance Tax, Wills and Probate course. There is also a Capital Gains Tax course and Specialist Landlord Tax training.
We also have a members’ guide on tax and finance, while our professional partners who can offer specialist advice are listed in the tax and legal support section of our member services hub.
More information
For more information about the research work – and other findings from the survey – you can access the research report in full here.
