Tax Changes For Landlords

Understanding the numerous taxes that apply to landlords and then calculating the amount of tax owed can be complex. To ensure that you meet all your obligations, keeping up to date with tax changes that may affect your income is essential.

In 2022, we’ve already seen buy-to-let tax changes coming into full effect, so what else should landlords be aware of?

Changes to tax

Some changes in UK tax regulations may impact landlords:

Tax on dividends – There is currently a £2,000 annual dividend allowance, but tax must be paid on income from a dividend after this allowance. From April 2022 tax on dividends increased by 1.25%. This means if you pay the basic tax rate, you will now pay 8.75% tax on dividend payments, those paying a higher rate of tax will pay 33.75%, and additional rate taxpayers will pay 39.35% on dividends.

National Insurance – National Insurance contributions have increased by 1.25%. Landlords renting properties as a business venture will see an increase in the NI contribution they must pay on any rental earnings if they exceed the relevant thresholds. It also means that if they employ people in their property business, employer contributions to NI will also increase.

Capital Gains Tax – The timeline for reporting and paying Capital Gains Tax made on profits from selling a buy-to-let property has increased from 30 days to 60 days.

Make Tax Digital – From April 2022, any landlord with a VAT-registered property rental business with a rental turnover below the VAT threshold of £85,000 must now keep digital tax records and report income and expenses figures online to HMRC each quarter as part of the Making Tax Digital initiative.

From 2024 this requirement will be extended to include self-employed landlords completing self-assessments. They will be required to maintain digital financial records compatible with HMRC’s Making Tax Digital system.

More changes on the horizon – 2022 is shaping to be an economically challenging year, with the possibility of higher inflation and recession affecting landlords’ finances.

Inflation, already at a 40-year high, is set to increase. In addition, rising interest rates are likely to continue their upward trend throughout 2022. Any rise in interest rates may concern landlords; if a mortgage is due to be renewed, it may be time to shop around for the best deal.

In addition to financial changes, The Renters Reform Bill will continue to go through the stages of parliamentary approval. Changes, such as proposed energy ratings certificate, carbon monoxide alarm regulations and “Lets with Pets”, mean landlords should be prepared for more changes in regulation and the extra costs they imply.

Preparing for an uncertain future

Making sure you are on top of your existing landlord’s obligations will make adjusting to whatever lies ahead easier because you won’t be in a position where you are already trying to catch up with reforms. Implementing a thorough inventory process is one important step to help you achieve this, providing you with a solid benchmark and clarity in an ever-changing sector.

The right business partner can also help you reduce running costs and ensure optimal occupancy for your properties.

No Letting Go

If you would like to discuss how our local support or national network at No Letting Go could become your inventory partner, streamlining costs, reducing your workload and boosting efficiency, then contact No Letting Go today.