Maximising your Taxes

Stamp Duty:

If you’re looking to get into the landlord game, just like with a residential property you’ll be required to pay Stamp Duty on your purchase. Now the Stamp Duty holiday is over, Buy to Let properties are back to the tiered structure, with a percentage payable between 0% and 15% depending on the price of the property. Heads up: you must send an SDLT (Stamp Duty Land Tax) return to HMRC and pay your SDLT within 14 days of completing the purchase. Your solicitor, agent or conveyancer can do this on your behalf, or you can file a return and pay the tax yourself.

Income Tax:

The good news: in the 2021 Budget, Chancellor Rishi Sunak announced a small rise in April 2021, after which income tax thresholds are frozen until 2026. The less good news is that you still have to pay it! Landlords are entitled to a £1000 tax free allowance. So if you make less than £1k a year, you don’t have to pay HMRC. If you make between £2,500 and £9,999 after expenses, or over £10,000 before allowable expenses, you’ll need to complete a self-assessment tax return and may have to pay income tax. You also might need to pay Class 2 National Insurance if you reach a certain threshold, being a landlord is your primary job, or you rent more than one property.

Capital Gains Tax:

If you’re thinking of selling up and getting out of the game, you may be liable to pay Capital Gains Tax if your rental property has gone up in value. From 6 April 2020, the annual exempt amount for individuals and personal representatives increased from £12,000 to £12,300, a lot lower than the feared 40% increase for the highest taxpayers. The level of capital gains tax is different to basic rate taxpayers and is currently at 28% for higher and additional rate taxpayers.

Corporation tax:

If being a landlord is your primary business, you’ll need to pay corporation tax, rather than income tax and capital gains tax. The current rate you’ll pay is 19% but that’s set to rise in 2023 to 25%. If you go down the business route, rather than staying as a private individual, you’ll need to register for corporation tax, file a corporation tax return, pay the tax or report that you have none. Also, with a few exceptions, you’ll need to pay any tax software that’s compatible with the government’s new(ish) Making Tax Digital rules. But you can find comprehensive guides from HMRC.

Expenses:

One of life’s big questions: what exactly qualifies as an expense? Much like the rules you have at work, when it comes to property there are plenty of nuances. The good news is HMRC provides a comprehensive list of the things residential landlords can claim as expenses, which are all connected to the day-to-day maintenance of your property. These include: letting agents’ fees, legal fees for lets of a year or less, or for renewing a lease for less than 50 years, accountants’ fees, council tax, utility bills and maintenance and repairs to the property, but not if they’re new improvements.

To see the rest of our Q1/21 Magazine, click the link below to view the articles online: HTTPS://ISSUU.COM/BRIKLONDON/DOCS/BRIK_MAGAZINE_-2021-_Q4_-_ISSUU