There are a number of new tax changes to buy-to-let that landlords should be aware of in 2022.
From the rental purchase tax relief you can claim and capital gains tax, to stamp duty rates and Making Tax Digital, here’s a look at what to watch for this year.
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New tax rules for rental owners
Here’s an overview of all the tax rules and changes homeowners need to be aware of in 2022:
Income tax rate 2022
So what exactly are the personal income tax rates and brackets for 2021-22? Your personal allowance is the amount you can earn before you start paying income tax.
Currently it is £12,570 – an increase of £70 on last year, and it is expected to remain at the same level for five years.
For the 2021-22 tax year, landlords will pay a 20% tax on rental income between £12,571 and £50,270.
The upper rate threshold for rental income has been increased to £50,271which is the point at which you start paying 40% tax on your profits.
The additional rate threshold (45%) remains unchanged at £150,000.
This purchase-to-lease tax calculator from Commercial Trust can give you an idea of how much your next tax bill will be.
Deadline for payment of capital gains tax on buy-to-let extended
After several changes over the past few years, it was announced in the fall budget that homeowners now have 60 days to report and pay capital gains tax when selling a property.
The reporting period has been doubled from 30 days, although it remains well below the maximum period of 22 months that was in place before April 2020.
There was speculation that the government would raise capital gains tax rates after a report by the Office for Tax Simplification. However, it looks like they will remain unchanged for the time being.
Fifth anniversary of home loan tax changes for the purchase of rental housing
For the 2021-22 tax year, landlords will once again get a 20% tax credit on interest payments instead of deducting mortgage expenses from rental income.
This year marks the fifth anniversary of the start of the controversial tax changes, with tax relief for rental property loans reduced by 25% each year until it reaches zero in 2020-21.
To help ease the rules, many landlords set up a limited company when purchasing a new rental property.
This is because you will be subject to corporate tax rates of 19%, rather than the higher personal income tax rates.
A recent analysis of Companies House data by the Hamptons real estate agency shows that more buy-to-let companies were set up in 2021 than in any previous year.
Making taxation digital for businesses subject to VAT
From 1 April 2022, owners of a VAT-registered business with taxable turnover below the £85,000 VAT threshold will be required to keep digital records and use accounting software to file their VAT return. income.
All self-assessed taxpayers will be required to comply with Making Tax Digital for income tax from April 2024.
Read our complete guide to tax digitization to find out what you need to do.
Stamp duty rates on rental purchases return to normal
In response to the Covid-19 pandemic, the government introduced a stamp duty holiday in July 2020.
Buy-to-let owners who bought properties during the stamp duty holiday saw an average saving of £2,000.
It was in place until October 2021, when stamp duty rates returned to normal. This means that owners who buy properties in 2022 will have to pay normal property tax rates, plus the 3% surcharge for second homes and rental properties.
Here is an overview of stamp duty rates for property investors in England:
|Real estate prices||Stamp duty rate|
|£0 – £125,000||3%|
|£250,001 – £925,000||8%|
|£925,001 – £1.5m||13%|
|1.5 million pounds +||15%|
The rules are slightly different for landlords in Wales and Scotland.
What about other changes to the buy-to-let regulations?
In addition to the tax changes, there are other regulatory updates owners should be aware of for 2022.
As part of the government’s Leveling Up white paper, several tenancy reforms have been proposed:
an end to evictions under section 21
a national register of owners
more fines and bans for rogue owners
a minimum standard for all rental properties
There are also plans to raise the minimum energy efficiency standard and extend the rules on carbon monoxide detectors in rental properties.
Read our 2022 Landlord Predictions to find out what these changes could mean for you.
How are you managing the evolution of rental taxation in 2022? Let us know in the comments below.
Photo 1: Prostock-studio/stock.adobe.com
Photograph 2: Monkey Business/stock.adobe.com
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