The hangover from 2020 is dragging on but for UK Buy-to-Let Landlords, it feels personal. The attached guide is a breakdown of some of the things to expect and prepare for this year.

Searching for silver linings?

Gone are the days when you could deduct mortgage expenses from a rental income. 2021 is the first full year landlords will receive a 20 per cent tax credit on interest payments, which isn’t as beneficial for higher-rate and additional-rate taxpayers

To help mitigate this many landlords are setting up limited companies.

PROS – Corporation tax rates of 19 per cent as opposed to higher individual income tax rates

PROS – Continue to off-set buy-to-let interest against your property

CONS – Mortgages harder to secure and expensive

CONS – Additional filing accounts and returns, add costs associated with this.

Capital Gains Tax – The good, the bad and the ugly

The Good – The Government actually increased the Capital Gains Tax allowance for 2020-21. It went from £12,000 to £12,300

The Bad – The Capital Gains Tax rate is higher for landlords – 18 per cent for basic-rate taxpayers, and 28 per cent for higher and additional-rate taxpayers

The Ugly -The Office of Tax Simplification was proposing the rate for basic taxpayers to increase from 18 to 20 per cent, and a 28 to 40 per cent increase for higher earners. Luckily in the last budget, they didn’t get their way.

Once a home now an income?

For those who once lived in their rental property, Private Residence Relief is now reduced from 18 months to 9 and the £40,000 of lettings relief will now only apply to landlords who share an occupancy with their tenants

Corporation tax

To claw back some of the debt incurred from the pandemic the Government is increasing Corporation Tax from 19-25% from the 1st of April 2023. The 19% rate will continue to apply to companies with profits of not more than £50,000, with marginal relief for profits of up to £250,000.

 

My teacher never gave me an extension

Landlords and tenants have struggled to make ends meet during the pandemic. Most have tried to work together but for some this hasn’t been possible. Mortgage payment holidays were offered to landlords to help manage any reduction in rent but fundamentally the loan still needs to be paid back. For any landlord trying to evict a tenant they won’t be able to commence court proceedings or physical removal till the end of May.

You can still serve section 21 and 8 notices but the Covid 6 month notice period remains

Don’t ‘let’ on live wires

In an effort to improve tenants safety, electrical inspections and certifications will now apply to existing tenanted property from the 1 April 2021. (All new tenancies have already been under this legislation since 1 July 2020.) Certification will last 5 years and any work required must be carried out within 28 days of the report.

Please click link here for a more colourful PDF version