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A changing property landscape for landlords Partner and resident property expert at George Hay Chartered Accountants, Toni Hunter, runs through some of the recent property tax changes affecting landlords and what they might expect from the upcoming Budget , and touches on key considerations for first-time investors. How has the property tax landscape changed in the past two years or so, for UK investors and landlords? UK property investors and landlords will have been impacted by a number of important tax changes taking effect between April 2019 and the present day. 2021/22 is the first tax year for which you cannot deduct mortgage expenses from rental income, with landlords receiving a 20 per cent tax credit on interest payments instead. In addition, since April 2020, Private Residence Relief has been restricted to nine months, and UK residents disposing of UK residential property have been required to report taxable gains and pay the estimated Capital Gains Tax (CGT) within 30 days of the completion of the transaction. As for what’s to come, the rate of Corporation Tax is set to increase to 25 per cent in 2023, for companies with profits exceeding £250,000, whilst a tapered rate will be introduced for those with profits exceeding £50,000, up to £250,000. This will impact UK resident and non-UK resident companies with an interest in UK property. A Budget and Spending Review has been announced for 27 October, what can landlords expect? It is fair to say that all crystal balls stopped working in March 2020. We are still waiting to hear the results of Capital Gains Tax reforms and are braced for increased tax rates and reducing reliefs for those who do not occupy the property they own. The “Build Back Better” programme promises focus on infrastructure but fails to mention the substantial housing shortage nor the disparity between wages and rent in certain parts of the country. In 12 connected
Cambridgeshire yields are relatively strong and gains are steady, so despite the heavy taxation, property can make a good investment if part of a long term strategy. What advice do you have for first-time property investors, and buy-to-let landlords? Research, research, research! The property market is extremely changeable and the ‘goalposts’ in respect of property taxation vulnerable to interference from the Government. Know the risks, ensure you comprehend the level of commitment required (including a “rainy day” fund to cover unexpected repairs or vacant periods), and have a plan – for example, what you can invest, how you will maximise your return and manage your portfolio, and who you will turn to for reliable, professional advice. To find out more about how we can support you with your plans for property investment, contact us on 01480 426500.
