Have you heard about the new tax rules on Buy-to-Let properties?

A record new 41,700 new buy-to-let limited companies were formed in 2020, and 2021 looking no different due to the new regulations in place having landlords looking at other options to reduce taxes. There have been a few important rule changes this year and recently, which include:

1. Tax relief on buy-to-let mortgages: this one won’t necessarily be news to everyone, but 2021 is the first full year where you cannot deduct mortgage expenses from rental income, and will instead receive a 20% tax credit on interest payments. To help reduce the new costs, more landlords are setting up a limited company to be subject to a Corporation Tax rate of 19% rather than higher individual income tax rates.
2. Capital Gains Tax increase: the government has increased the CGT allowance for 2020-2021 from £12,000 to £12,300. If you are selling a second property you get to earn more tax-free but CGT is 18% for basic-rate taxpayers and 28% for higher and additional-rate taxpayers.
3. Private Residence Relief: 2021 is first full year of restrictions since rules changed April 2020. The lettings relief (able to be claimed if you rent out a property that has been your main home) will only apply to landlords who share an occupancy with their tenants.
4. Buy-to-Let income tax rates: The 2021 personal tax allowance before starting to pay income tax is currently £12,500. Higher-rate threshold for rental income increase to £50,000 (Point where higher rate of tax applies, at 40%)
5. Stamp duty holiday is due to end 30 June.

Other updates which landlords should know about for 2021 include the Covid tenant eviction ban extended until end of May 2021, new electrical safety standards for landlords, leaseholders can extend their lease by 990 years.

For more information about updates and regulations, keep reading our weekly Tuesday blogs or follow our Facebook. Get in touch with your local ASC office to find out more information and secure finance for your business.