The UK’s tax system is complicated – there’s no denying that. It causes many difficulties for landlords and the self-employed who try their best to stay on top of things. And with constant changes to the system, it’s hard to keep up.
Below you’ll find a summary of the many property tax changes that have occurred during the past 5 years, along with other significant changes, providing you with a brief overview and links to further details.
- Since 6th April 2020, if you are a UK resident and you sell residential property, you have 60 days to tell HMRC and to pay the Capital Gains Tax (CGT) owed.
- Non-UK resident companies that have a UK property business or property income become chargeable for Corporation Tax.
- Introduction of zero rates of Stamp Duty Land Tax (SDLT) on the first £500,000 of property value until 31st March 2021 – (the 3%+ additional SDLT for additional property still applies)
- Non-resident SDLT surcharge of 2% from 1st April 2021.
- Removal of Letting Relief as well as the Private Residence Relief with final exemption period reduced from 18 months to 9 months.
- From 6th April 2020, report and pay your non-resident CGT bill from the date of the conveyance or risk paying a late filing penalty and interest charges.
- Mortgage interest relief (Section 24) is fully disallowed and replaced with a maximum 20% tax credit – What is the impact on landlords’ tax bill?
- UK tax on gains from disposals of non-resident interest in UK land and property – 30 day filling. (How to tell HMRC)
- Non-resident companies disposing of UK property are brought into the corporation tax regime.
- Mortgage interest relief (Tenant Tax) is limited to 25% of finance costs. Watch our 8-minute video ‘How to Work Out if Your Portfolio is Impacted by Section 24?’
- Mortgage interest relief is limited to 75% of finance costs – What is Section 24?
- Changes to taxation of non-doms and IHT ‘look through’ for UK residential property
- From 22nd Nov – The higher rates of SDLT for additional property rule in transfers of interests between spouses and civil partners no longer apply. Does this make gifting property to your spouse for tax purposes significantly cheaper?
- Trading and property allowance. Find out more about Tax-free allowances on property and trading income.
- Cash basis becomes the default method if you run a small self-employed business with a turnover of up to £150,000.
- SDLT first time buyer relief for properties costing below £500,000.
- 3% surcharge on SDLT for second homes for contracts concluded after 26 November 2015.
- Wear and tear allowance for furnished properties replaced by replacement of domestic items relief
- Expansion of ATED to properties valued at more than £500,000
- Announcement on the 29th of September 2016 by the Prudential Regulation Authority (PRA) outlining new minimum standards that would apply to firms who underwrite buy-to-let mortgage contracts.
- Non-resident Capital gains Tax for non-residents disposing of residential property
- Expansion of ATED to properties valued at more than £1mn
- Announced in the Summer Budget, and introduced on 6th April 2017, mortgage relief restriction (Section 24) is an amendment to UK Tax Law. It means the amount of income tax relief landlords receive for residential property finance costs will be restricted to the basic rate of tax.
- Stamp Duty Land Tax (SDLT) is charged at 15% on residential properties costing more than £500,000 bought by certain corporate bodies – or ‘non-natural persons’
- There is a 3% surcharge on residential properties bought by companies
Earlier Significant Changes
- 2014 – Mixed Membership Partnership Rules introduced. (Does this mean landlords can’t use mixed partnerships?)
- 2014 – 15% SDLT for enveloped dwellings (ATED) on property costing over £500,000 (for returns from 2016 to 2017 onwards) What is a dwelling?
- 2013 – 15% SDLT for enveloped dwellings costing over £1m (for returns from 2015 to 2016 onwards)
- 2013 – New rules on the deductibility of loans for inheritance tax (IHT) purposes
- 2012 – 15% SDLT for enveloped dwellings costing over £2m (for returns from 2013 to 2014 onwards)
- 2007 – Changes to the default 50/50 split on property income between spouses can be declared using what’s known as Form 17.
The above changes, alongside a shifting macro-political market with governments looking to professionalise the industry, have made it more and more difficult for private and accidental landlords to run a profitable business. At a minimum, the common strategy of buying and holding property in personal names is being rethought. Less Tax 4 Landlords was founded to help private landlords continue to be in a position to provide much needed housing to the UK market.
Our multi-disciplinary approach is a unique service (in so far as we are aware) to the PRS, fully tailored to help Landlords maximise the value of their business both today and during their lifetime, whilst ensuring that they can pass on their hard-earned wealth to those they care about most.
Who we can help
Typically (but not restricted to), landlords who:
- Own rental property in personal names,
- are (or would otherwise be) higher or advanced rate tax-payers,
- are portfolio landlords with 4 or more properties and in excess of £50,000 Gross Rental Income, or have the means, motivation and opportunity to get there and beyond with a protective business structure in place
- are looking to build, run, and grow a professional property business which is capable of being passed on intact to future generations.
By Taking Professional Advice You Could Enjoy:
- No need to remortgage or change title (thus no CGT or Stamp Duty)
- A lender-friendly business structure suited to your needs
- Seamless succession planning and protection from marital break-up
Plus, depending on your business requirements;
- Full relief for finance & mortgage costs (Section 24 Tax Changes)
- Reduced Capital Gains Tax (CGT) on Portfolio Reinvestment
- Inheritance Tax typically mitigated within 2 years of trading
- Maximum Tax Rate of 20% payable on your property income
- We work with landlords looking to build professional businesses and in fact, by working with us over the long term, and providing it fits with your goals and aspirations, we would expect you to significantly increase your business profits.
- The result? More money in your pocket, and more tax paid – not less!
To learn more about running a tax-efficient professional property business, we recommend registering for our free video vault. Here you can find over 149 minutes of free tax and business planning videos. Simply click on the image below.
Alternatively, go to the assessment page and fill out the enquiry form and one of the Less Tax 4 Landlords team will be in touch.
Any information on this website is for general guidance only. The information may come from multiple sources and is based on our understanding of current taxation, legislation and HM Revenue & Customs practice as at the date stated, all of which are liable to change without notice. You should always seek coordinated advice before taking action.