- Rent-a-Room relief raised to £7,500.
- Withdrawal of the 10% Wear and Tear allowance.
- Replacement of Domestic Items Relief introduced (similar to replacement cost basis).
- An additional 3% Stamp Duty Land Tax (SDLT) payable by buyers of investment residential property.
Changes to property income in recent years:
In 2017 HMRC changed their Property Income Manual guidance (and presumably part of their policy) on tax relief on interest when a loan is increased on a property to allow the withdrawal of capital. Their guidance in their Business Income Manual remains unaltered.
Autumn Budget 2017 provided for a change of policy in relation to landlords' motor expenses:
From 6 April 2017 (Landlords’ motor expenses):
- Individual landlords and partnerships (excluding Mixed Member Partnerships) are able to use fixed mileage allowances.
- Transitional provisions apply to landlords who had previously used the Extra Statutory Concession.
- The cash basis become the default method for unincorporated property businesses with receipts under £150,000.
- Taxpayers can elect to use the accruals basis instead.
- A separate decision can be made for each property and trading business of a taxpayer as to whether to apply the cash or accruals basis.
- Joint owners can each pick their own basis unless they are spouses or civil partners who must both adopt the same basis.
- The existing cash basis rules for traders apply with some modifications.
- The cash basis doesn’t apply to companies, Limited Liability Partnerships (LLPs), partnerships with corporate members, or trusts.
Higher rate relief on mortgage interest restricted for buy-to-let landlords
- Basic rate tax paying landlords are not immune from these measures: mortgage interest is no longer an allowable deduction from property income and a new adjustment is then required in order to claim basic rate tax relief.
- Individuals with UK and overseas property income can choose how to allocate the allowance but cannot create a loss.
- The allowance will not apply to income on which Rent-a-Room relief is given.
- The property allowance is not available if an individual receives a tax reduction for non-deductible interest.
COVID-19 measures creating changes to property income:
- Although Furnished Holiday Letting (FHL) is specially treated as a trading activity for income tax, any other property letting is classed as an investment activity and landlords cannot claim for lost profits under the COVID-19: Self-employed Income Support Scheme (SEISS).
- HMRC allowed a temporary soft landing on penalties under a new 30-day Capital Gains Tax (CGT) reporting regime. Capital Gains on UK residential property within the new 30-day deadline until after July 2020.
- Finance Act 2020 made changes to CGT Private Residence Relief. Lettings relief is restricted and is only available for periods where the owner is in shared occupancy with the tenant.
- The final period exemption is reduced from 18 months to nine months. It will remain 36 months for those cases that currently qualify for the extended period.
From 6 April 2021
- Finance Act 2021 introduced an extended trade loss relief carry-back for income tax and corporation tax, this does not apply to rental business or FHL.
- Finance Act 2021 also made changes to SDLT (Stamp Duty Land Tax) & ATED (Annual Tax on Enveloped Dwellings)
Upcoming changes to property income:
From 6 April 2024
- Self-employed businesses and landlords with business turnover above £10,000 must report under Making Tax Digital (MTD) for Income Tax.
- HMRC is testing the system with a MTD Income Tax Pilot.
- Corporation tax rates increase to 25% for profits over £250,000.
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