Getting your taxes right is crucial for property investors and landlords. While some may employ an accountant to take care of matters, it’s still important to know the latest rules.

Some of the main taxes most property investors need to be aware of are stamp duty land tax (SDLT), income tax and capital gains tax. Tax can often work slightly differently for property investors compared to homeowners, and the rules can often change.

One major change that has happened recently, which has affected a number of landlords, is Section 24 of the Finance Act 2015. This adjustment means property investors can no longer claim residential mortgage relief when calculating income tax, which you can read more about here.

Lower tolerance from HMRC

Now that the above mentioned Section 24 tax relief legislation has been fully rolled out, HMRC may begin to crack down more on landlords who misreport. This is according to predictions from Tim Walford-Fitzgerland, a partner at accountancy firm HW Fisher.

“HMRC may get more aggressive with landlords who have missed some of the changes in rules in recent years,” he says. “Now that the residential mortgage relief restriction is in full force, we expect less tolerance for misreporting, especially in light of the losses that some landlords may have from recent defaults.”

The way property investors pay capital gains tax has also changed recently. Now, the tax must be paid within 60 days of a property sale. However, again, Walford-Fitzgerald expects that HMRC will have little tolerance towards those who miss their deadlines, so property investors need to be aware of this.

VAT changes for holiday let owners

Last year, the government cut rates for VAT-registered business to 5% for certain supplies, including those linked to holiday accommodation. So property investors who own holiday lets will have been able to take advantage of this.

This was done as a result of the difficulties faced by certain industries, including holiday and hospitality, because of Covid. However, the rate was increased to 12.5% as of 1 October 2021, so property investors with holiday lets will now need to pay the higher rate.

Everyone should brush up on rules – including property investors

After a hugely busy year of property transactions in the UK, the Treasury will be expecting a big tax windfall. Of course, the stamp duty holiday offered during the peak of the pandemic will also have cut the bill for many.

But Walford-Fitzgerald says that with HMRC likely to be stricter where new rules have come in, landlords, developers and home renovators should all know where they stand with tax.

He concludes: “Last year was been one of the busiest for the housing market in more than a decade. According to Zoopla, estimates show that there were 1.5 million sales in 2021, with the total value of homes changing hands at £473bn, some £95bn higher than in 2020.

“As a result, we expect to see HMRC become more proactive on reclaiming owed property tax. As property transactions tend to involve high values, if there is an issue with VAT it usually involves a significant sum. It is therefore very important that landlords, developers and home renovators are up to speed with the latest changes.”

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