At Gorilla Accounting, we provide specialised advice for all our clients, no matter which sector they work in. To do this, we make sure we’re aware of all changes to UK employment and tax legislation, as well as the latest industry news, which includes the latest update to the property sector.
So, as buy-to-let landlords, we want to help you stay on top of key deadlines. Have a look at what’s happening in the property sector at the moment and what you should look out for in the future.
Self-Assessment Tax Return
Self-employed individuals have to submit their 2020/21 self-assessment tax return by 31st January 2022, which is also true for landlords. You must declare the income you get from your property portfolio so, any personal rental profits you made during the time period of April 6th, 2020, to April 5th, 2021, needs to be reported in this return.
HMRC have announced that there will be no late filing penalty for anyone that submits their 2020/21 self-assessment in February 2022, but late payment interest will still apply.
If you don’t submit this information on time, you immediately receive a penalty of £100, which will continue to grow over time until you pay everything you owe to HMRC.
Gorilla Accounting offers a wide range of services to our clients, including a self-assessment tax return service to help you fill out, submit and pay your taxes. If you’re stressed about submitting on time or simply aren’t sure how to fill out the paperwork, then this service is perfect for you!
Reduction in Finance Cost Relief for Individual Landlords
Another thing you should keep in mind if you’re a landlord is that the government has been restricting the amount of income tax relief on residential property finance costs since 2017. This means that landlords with higher incomes no longer benefit as much as they used to.
The plan was to reduce the relief down to the basic rate of tax, which is 20%, from 2020/21 onwards (so, landlords now only get a basic rate reduction for their finance costs).
This has led to many landlords wanting to own properties through a limited company, especially if they were already a high-rate taxpayer. Companies pay a corporation tax rate of 19% when compared with personal income tax rates of 20%, 40% and 45%, so it’s not surprising this is a more attractive option, mainly if you want to keep the profits after tax in the business to reinvest.
We can help you set up your own limited company, so speak to us to learn more about the benefits of this operating structure.
Capital Gains Tax
If you’ve sold a UK residential investment property, you must file a return to HMRC to report the gain, which is separate from your self-assessment tax return. The reporting of the capital gain can now be done within 60 days of the property sale (previously, it was 30 days).
Making Tax Digital
HMRC are going forward with the introduction of Making Tax Digital for Landlords, which will apply to landlords that have personally owned property with rental income of, at least, £10,000. Making Tax Digital for individuals will be introduced on 1st April 2024, so you still have time to prepare. After this date, you’ll have to submit quarterly filings to HMRC using software that is compliant with MTD.
When you become a Gorilla Accounting client, you get 24/7 access to FreeAgent bookkeeping software, which you can access at any time and from any device. The software helps you keep all your transactions, receipts, invoices and expenses organised.
Corporation Tax
From April 2023, corporation tax will increase from 19% to 25% for UK businesses with taxable profits of over £250,000 (The rate between £50,000 & £250,000 is 26.5%). For many landlords, the impact will be minimal because the rate will remain at 19% for businesses with profits below £50,000.
Owners of more than one business may have to pay a higher corporation tax rate because the lower and upper thresholds will be reduced for associated companies.
At Gorilla Accounting, we can help you stay on top of everything landlords should know in the new tax year and beyond. In addition, we also provide specialist advice and accounting services to clients in other sectors, such as IT and medicine, so let us know if you’d like more information about what we can do for you.
