As a landlord in the UK, it's important to stay informed about the latest changes to tax law and how they may affect your income and expenses. Recently, there have been several changes to the way landlords are taxed in the UK, and it's important to understand how these changes may impact your bottom line.
One of the most significant changes was the reduction of the wear and tear allowance. This allowance, which was previously available to landlords for the replacement of furnishings in their rental properties, has now been replaced with a new "replacement of domestic items relief." Under this new relief, landlords are only able to claim tax relief on the actual cost of replacing domestic items, rather than a flat allowance. This change had a significant impact on landlords who relied on the wear and tear allowance to offset their expenses.
Another change to UK tax law that may affect landlords is the phasing out of the mortgage interest relief. This relief, which allows landlords to deduct the cost of their mortgage interest from their rental income, has been phased out over the past few years. This means that landlords will have to pay more tax on their rental income as the mortgage interest relief decreases. You may have noticed this on your last tax bill.
On April 6th, 2020, changes to the rules surrounding Principal Private Residence (PPR) and letting relief were put into effect. These changes may significantly impact landlords who have previously rented out a property that they have lived in. However, if you have never lived in your rental property, these changes will not affect you.
One of the key changes is the reduction of the final period exemption from 18 months to 9 months for properties that were once considered the landlord's principal private residence. This means that landlords may face a higher tax bill when they come to sell their rental property.
Another change is the restriction of “letting relief”, which will now only apply during periods when the landlord has been living in the property with their tenants. This further limits the opportunities for landlords to claim relief on their taxes.
Additionally, amendments have been made to the rules surrounding gains on properties that have been transferred between spouses, in order to make the process fairer.
Finally, there is also a reduction in the deadline for reporting capital gains to HMRC, and for paying capital gains tax, from 90 days to 30 days after completion of the sale. This means that landlords will need to act quickly to ensure they are in compliance with the new rules.
Overall, these changes can be considered as a significant shift in the rules surrounding PPR and letting relief. Landlords who have previously rented out a property they have lived in will need to be aware of these changes and take them into consideration when making future decisions.
It's important to note that these changes to UK tax law are complex and may have varying effects on different landlords depending on their specific circumstances. It's always a good idea to consult with a tax professional to understand how these changes may impact your income and expenses as a landlord.
In conclusion, the UK tax laws are in a state of constant change and as a landlord, it is crucial to stay up to date with the latest developments and how they may affect your rental income and expenses. Seek professional advice and stay informed to ensure that you are taking advantage of all available tax reliefs and deductions.
