15 Jun Landlords: New Tax Rules 2021
As a family-run, busy estate and lettings agent in Colnbrook, we pride ourselves on keeping all of our clients up to date with the latest news that could affect them and their property decision making. We have a large range of different clients, from vendors and buyers to tenants and landlords; so, when there is some news that might affect one segment of our client base, we make sure to report on it.
One of the biggest issues facing landlords across the UK at the moment is the changes in tax rules; in some cases, it is driving potential property investors away from the idea, but for those with their hearts set on becoming landlords or existing landlords there are things you can do to make the best of the situation.
Tax Relief on buy-to-let mortgages
While this isn’t a new rule change, 2021 is the first full year in which you can’t deduct mortgage expenses from your rental income. Landlords are able however, to claim tax relief on mortgage interest payments and fees, as well as fees incurred on loans to buy furniture and other expenses associated with renting a property.
As a result of this, some landlords have set up limited companies when buying new properties to rent in order to avoid higher individual tax rates.
Changes to Private Residence Relief
From April 2020, changes to private residence relief meant that landlords would lose nine months’ worth of Capital Gains tax relief when they came to sell. Up until that time, landlords had been able to claim private residence relief for all the time they lived in their property before letting it to tenants, plus a further 18 months after moving out. This final exemption period was reduced to the time they lived in their property, plus nine months post moving.
Landlords who rent out a property that was once their main home also saw their £40,000 worth of letting relief scrapped as from April 2020, and only landlords who share occupancy with their tenants are be able to claim.
Income Tax for landlords
Depending on your situation and total income, you may have to fill out a self-assessment tax-return. The rate of income tax you pay varies by income. In the 2021 Budget, Chancellor Rishi Sunak announced a small rise in April 2021, after which income tax thresholds will be frozen until 2026.
From April 2021, the personal allowance was set at £12,570. This means you pay the basic rate – 20 per cent of your income – on anything after that income, up to and including £50,270. The higher rate of 40 per cent tax applies to incomes over £50,270 – and if you make more than £150,000, you pay the additional rate of 45 per cent.
If you would like to speak to someone about buying a property to let, now could be a great time. There are lots of good mortgage products to help you onto the investment ladder, and in our area, there are plenty of opportunities to make a good living from properties.
If you are looking to move to this are, we are the leading independent estate agents in Colnbrook and are location experts. So, contact us on 01753 683000 or email us. You can also follow us on Facebook, LinkedIn and Instagram.