There are a number of new buy-to-let tax changes landlords should be aware of in 2022.
From the buy-to-let tax relief you can claim and capital gains tax, to stamp duty rates and Making Tax Digital, here’s a run-down of what to watch out for this year.
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Here’s an overview of all the tax rules and changes landlords need to be aware of in 2022:
So what exactly are the individual income tax rates and bands for 2021-22? Your personal allowance is the amount you can earn before you start paying income tax.
Currently this is £12,570 – an increase of £70 from last year, and it’s set to remain at the same level for five years.
For the 2021-22 tax year, landlords will pay 20 per cent tax on buy-to-let income between £12,571 and £50,270.
The higher rate threshold for rental income has increased to £50,271, which is the point at which you start paying 40 per cent tax on your profits.
The additional rate (45 per cent) threshold remains unchanged at £150,000.
This buy-to-let tax calculator from Commercial Trust can give you an idea of how much your next tax bill could be.
After several changes in recent years, it was announced in the Autumn Budget that landlords now have 60 days to report and pay capital gains tax when they sell a property.
The reporting period has been doubled from 30 days, although it remains well below the maximum 22-month period that was in place before April 2020.
There was speculation that the government would increase capital gains tax rates after a report by the Office for Tax Simplification. However, it seems they’ll be left unchanged for now.
For the 2021-22 tax year, landlords will once again get a 20 per cent tax credit on interest payments instead of deducting mortgage expenses from rental income.
This year marks the fifth anniversary of when the controversial tax changes started, with buy-to-let mortgage tax relief reduced by 25 per cent each year until it reached zero in 2020-21.
To help mitigate the rules, many landlords have set up a limited company when buying a new rental property.
This is because you’ll be subject to corporation tax rates of 19 per cent, rather than the higher individual income tax rates.
Recent analysis of Companies House data by estate agency Hamptons shows that more buy-to-let companies were set up in 2021 than in any previous year.
From April 1 2022, landlords with a VAT-registered business with a taxable turnover below the VAT threshold of £85,000 will need to keep digital records and use accounting software to file their tax return.
All Self Assessment taxpayers will need to comply with Making Tax Digital for income tax from April 2024.
Read our comprehensive guide on Making Tax Digital to find out what you need to do.
In response to the Covid-19 pandemic, the government introduced a stamp duty holiday in July 2020.
Buy-to-let landlords who bought properties during the stamp duty holiday made an average saving of £2,000.
It was in place until October 2021, when stamp duty rates returned to normal. This means landlords who buy properties in 2022 will need to pay normal stamp duty land tax rates, plus the three per cent surcharge for second homes and buy-to-let properties.
Here’s an overview of stamp duty rates for property investors in England:
|Property price||Stamp duty rate|
|£0 – £125,000||3%|
|£125,001 – £250,000||5%|
|£250,001 – £925,000||8%|
|£925,001 – £1.5 million||13%|
|£1.5 million +||15%|
As well as tax changes, there are further updates to regulations that landlords should know about for 2022.
As part of the government’s Levelling Up White Paper, several rental reforms have been proposed:
There are also plans to increase the minimum energy efficiency standard and extend the rules on carbon monoxide detectors in rental properties.
Read our 2022 predictions for landlords to find out what these changes could mean for you.
How are you managing buy-to-let tax changes in 2022? Let us know in the comments below.
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