Over recent years and during the COVID-19 lockdown, there have been quite a few changes to taxation which could affect you as a landlord. In this article we’ve highlighted the main changes to be aware of and, if needed, included some ways you can secure help letting a property.
Property tax is complicated as it depends not just on your earnings from property, but on the rest of your income and assets too. It is worth considering engaging a property tax expert for help and support filing your returns and calculating the tax you owe correctly. But for reference, we’ve outlined a few of the key things you should be aware of:
1. Know when the tax deadlines are
There are two key dates to be aware of over the coming months:
- Saturday 31 October 2020 – this is the deadline to file your 2019/20 return if filing on paper
- Sunday 31 January 2021 – this is the deadline to file your 2019/20 tax return if filing online. In addition you need to pay your first payment on account if applicable.
2. Know how much Capital Gains Tax you’re liable to
Capital Gains Tax (CGT) is the “profit” you make when you sell a property that isn’t your main home if it has increased in value. There is an allowance of how much profit you can make without paying tax, and deductions to reduce the bill are possible too.
However, the main change to be aware of is that since Monday 6 April 2020, if you are UK resident you only have 30 days from the date the property sells to alert HMRC and pay any CGT you owe.
3. Know when the Stamp Duty holiday started – and when it ends
Known as the Stamp Duty holiday, from Wednesday 8 July 2020, in England and Northern Ireland, you were exempt from paying Stamp Duty if the value of the home you bought was £500,000 or less. This exemption lasts until Wednesday 31 March 2021.
However, this is only applicable to those who own one home. For landlords who own more than one property, you still have to pay the additional 3% Stamp Duty.
4. Know more about ‘Making Tax Digital’
If you’re a landlord with an annual rental income (income, not profit) of more than £10,000, then it’s worth being aware of changes the Government has been introducing to the current tax system which allow you to report your earnings digitally on a quarterly basis.
If you’re a self-employed business or landlord (excluding rented furnished holiday lettings), you can use approved software to keep your business records in digital form, and then send Income Tax updates digitally to HMRC. This has the benefit of not having to submit paper self-assessment tax returns.
Currently, self-employed individuals and landlords can register for the Income Tax pilot. Find out more about Making Tax Digital here.
5. Know more about the tax help available for landlords
Tax can be daunting, but there is lots of help available - and during COVID-19 there is more help than ever before. To being with, gathering together all the necessary material for tax returns can be time-consuming. However, if you let your property through Romans using our popular Fully Managed Service, you can use our online Landlord Account to make life easier as it provides you with instant access to all the documents you need in one place.
Your account is accessible online at any time, and among other benefits, it lists the latest news about each of your rental properties, including information on safety and recent property visits. And for tax purposes, there are monthly and annual statements. Using Romans’ Fully Managed Service makes tax returns for your property investments straightforward, relieving you of much of the burden of the complex and time-consuming section of your tax return.
And whenever you have a question, your Property Manager is just a click away.
In addition to help with information for your tax forms, the Government has created ways to reduce the impact on those suffering because of the coronavirus pandemic:
- Deferring tax payments. The second payment on account towards income tax for the 2019/20 tax year could have been deferred to the end of January 2021 (from July 2020). Be aware though, you may have to pay the deferred tax, the tax you owe then and your first payment on account, if applicable. For those who self-assess their tax, from Thursday 1 October 2020, if you have up to £30,000 of self-assessment liabilities you can access HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. Contact their dedicated online helpline or call 0800 024 1222.
- Deferring mortgage payments. For landlords who are not receiving any or only part of the rent and have a mortgage, new applications to defer mortgage payments will be accepted up until Saturday 31 October 2020, and if already taken, can be extended.
- If tenants have difficulty paying the rent. Tenants are still liable for their rent and should pay this as usual. If they face financial hardship, support has been available through various Government schemes. However, with eviction notices of six months currently in place, discussing missed rental payments with a tenant quickly is essential.
To find out more about Romans’ rental services call 0808 2569 017 to speak to a member of the team. Or apply for a free property valuation to find out how much rental income you could earn from your property.
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