Taxation for landlords has been changing constantly over the last few years, and further changes have been made during the coronavirus pandemic which could affect you. It’s important you know the latest changes, so take a read of our updated article.
We have highlighted some of the main ones to be aware of, but as the tax you pay is based on all of your earnings and assets, not just from property, it is wise to secure the help and support of a property tax expert when filing and calculating your returns. Here are key things, as a landlord, you need to know:
1. Know the deadlines for filing and paying tax
There are two key dates to be aware of over the coming months:
- Saturday 31 October 2020 – this is the deadline to file your 2019/20 return if filing on paper
- Sunday 31 January 2021 – this is the deadline to file your 2019/20 tax return if filing online. In addition you need to pay your first payment on account if applicable.
2. Know the changes to the timings of Capital Gains Tax
When you sell a second home that isn’t your main property, if it has increased in value, minus any deductions such as agent or legal fees when buying/selling, above the Capital Gains Tax allowance (CGT) you are likely to have to pay tax.
The key change, implemented since Monday 6 April 2020, is that if you are a UK resident this tax needs to be paid within 30 days of the property sale, and you must advise HMRC of the amount you owe.
3. Know when the Stamp Duty and the Land and Building Transaction Tax holiday ends
Following the property market re-opening after lockdown in May, on the Wednesday 8 July 2020 in England and Northern Ireland, a Stamp Duty ‘holiday’ was announced, allowing people to buy a property up to the value of £500,000 until Wednesday 31 March 2021 with zero Stamp Duty to pay.
However, if you are buying a second property which isn’t a main home, you still have to pay the additional 3% Stamp Duty.
Shortly after, Scotland applied a holiday to their equivalent of Stamp Duty: The Land and Buildings Transaction Tax holiday (LBTT) for properties up to the value of £250,000, although as in England and Northern Ireland, the additional second homes tax still applies. The holiday also lasts until Wednesday 31 March 2021.
4. Know about ‘Making Tax Digital’
Making Tax Digital (MTD) is the UK Government’s plan to migrate the current tax system to a fully digitised online tax system. The improved accuracy of digital records, sent directly to HMRC and available to view in real time, hopes to avoid errors and streamline the system. It means that landlords are less likely to lose receipts, and are therefore less likely to end up paying more tax than is actually due.
If you are a self-employed business or landlord (excluding rented furnished holiday lettings) you have the option of using specified software to keep your business records digitally and send Income Tax updates to HMRC on a quarterly basis, instead of filing a paper self-assessment tax return.
Currently, self-employed individuals and landlords can register for the Income Tax pilot. Find out more about Making Tax Digital here.
5. Know about the tax help available for landlords
Few landlords enjoy filling out tax forms and we know part of the reason for this is that collating all the necessary information can be time-consuming. However, if you let your property through Leaders using our Fully Managed service, you can use your Landlord Account to reduce the workload.
Available online 24/7, your account lists the status of each of your rental properties, including information on safety and recent property visits. And from a tax perspective, there are downloadable monthly and annual statements, so the information you need is at your fingertips, any time you need it.
In addition to help with information for your tax forms, the Government has created ways to reduce the impact on those suffering because of the coronavirus pandemic:
- Deferring tax payments. The second payment on account towards income tax for the 2019/20 tax year could have been deferred to the end of January 2021 (from July 2020). Be aware though, you may have to pay the deferred tax, the tax you owe then and your first payment on account, if applicable. For those who self-assess their tax, from Thursday 1 October 2020, if you have up to £30,000 of self-assessment liabilities you can access HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. Contact their dedicated online helpline or call 0800 024 1222.
- Deferring mortgage payments. For landlords who are not receiving any or only part of the rent and have a mortgage, new applications to defer mortgage payments will be accepted up until Saturday 31 October 2020, and if already taken, can be extended.
- If tenants have difficulty paying the rent. Tenants are still liable for their rent and should pay this as usual. If they face financial hardship, support has been available through various Government schemes. However, with eviction notices of six months currently in place, discussing missed rental payments with a tenant quickly is essential.
To find out more about Leaders’ rental services call 0343 253 8237 to speak to a member of the team. Or apply for a free instant valuation online to find out how much rental income you could earn from your property. Why not check out our guide to cash basis?
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