Changing times for Landlords

Should I sell my properties?

It depends on your personal circumstances and other income.

If I sell, will I pay tax on my profit?

If the property is sold for more than you paid for it (including all costs), then you have made a gain and this will be subject to Capital Gains Tax for any periods you did not occupy it as your main residence.

This tax is paid at 18% for gains within the first £50,270 of your income and 28% where the gain exceeds this.

That sounds like a lot. Is any of it tax-free?

Every person gets an annual exemption, for 2023/24 this is £6,000 but will decrease to £3,000 on the 6th April 2024.

At least I have up the 31st January to pay my tax…

Since the 6th April 2020, the sale of residential property must be reported on a separate return in addition to your tax return. This return is now due within 60-days of the sale completing and the tax must be paid within 60-days as well.

Maybe I’ll keep my properties…

Of course, our accountants can discuss the benefits of Hammock, as well as changes in EPC requirements or interest rates.

Not more interest rate increases…

Increase rates have increased, and for higher rate taxpayers this has affected their property’s cash flow.

For traditionally let properties, the interest cannot be claimed as a business expense and instead, 20% of the interest is claimed as a finance cost.

But, one of my properties is a Furnished Holiday Let. I get all of the interest there, right?

Yes, for Furnished Holiday Lets (FHLs), all of the interest is allowed as an expense against the profits generated. This is also the case for properties held within a company structure.

So, what’s this about EPCs and Hammocks?

Since the 1st October 2008, landlords must maintain a EPC rating of at least E in their properties. Currently, plans are in development to extend these requirements to EPC rating C. We recommend you read our article on capital allowances to understand the tax effect of any expenditure.

Hammock is one of our software partners, and they exist to help you comply with Making Tax Digital (when it eventually comes in) and to save you time by recording all of your tenancy information, records, income and expenditure in one place.

Anything else I should think about?

As we said earlier, it depends on your personal circumstances, but some of our clients are talking to us about property companies and incorporations, some are selling, some are talking to us about inheritance tax planning and creating trusts for their children.

If you need further advice or guidance on this topic, we recommend you speak to your accountant or get in touch with us here so we can help.