Over the next few months, buy-to-let landlords are to be hit by a raft of tax changes. From stamp duty rates to capital gains tax to buy-to-let tax relief alterations, things look set to become even more difficult for BTL landlords running businesses in the UK.
Income Tax Rates 2022
The current personal allowance (the amount you can earn before paying income tax) is up £70 from last year, now standing at £12,570. This is to remain fixed until 2027 at the earliest.
For this tax year, BTL landlords generating income between £12,571 and £50,270 will be taxed at a rate of 20%, those earning above this £50,270 threshold will be subject to 40% taxation, while the £150,000 threshold paves the way for 45% or higher rate taxation.
Capital Gains Tax
One welcome change to BTL legislation is the extension of the time landlords have to report and pay capital gains tax, following the sale of a property.
Reduced significantly from 22 months to just 30 days in April 2020, the grace period has now been doubled to 60 days.
Increases in capital gains tax had been predicted for some time, but are set to remain unchanged for the time being.
For this tax year, BTL business owners will again be able to claim a tax credit worth 20% on interest payments, rather than deducting mortgage costs from their rental income.
It has now been five years since the government introduced its controversial tax changes for BTL landlords, gradually reducing mortgage tax relief each year until it was wiped out entirely last year.
Companies House data suggests that more BTL landlords set up limited companies when purchasing new rental properties last year than ever before, in order to avoid higher rate personal income taxation by instead paying corporation tax at a fixed rate of 19%.
Buy-to-Let Stamp Duty
All stamp duty incentives for BTL property purchases in England have now ended, which up until October 2021 provided buyers with the opportunity to save (on average) £2,000.
As of now, normal stamp duty rates have resumed for investors in England, as follows:
|Property price||Stamp duty rate|
|£0 – £125,000||3%|
|£125,001 – £250,000||5%|
|£250,001 – £925,000||8%|
|£925,001 – £1.5 million||13%|
|£1.5 million +||15%|
Stamp duty obligations differ slightly for BTL property purchases in Scotland and Wales.
Other Buy-to-Let Regulation Changes
Along with the alterations to tax obligations outlined above, several further regulatory changes for BTL landlords have been outlined by the government.
Key proposals for the year ahead (part of the Levelling Up White Paper published by the government) include:
- A national landlord register
- the end of Section 21 evictions
- a minimum standard for all rental properties
- more fines and bans for rogue landlords
Legislation is also set to be introduced that will further existing rules on the installation of CO2 alarms in BTL properties, along with the requirement for rental homes to meet elevated energy efficiency standards by law.