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Making Tax Digital Expands

Written by admin on . Posted in Landlord, Making Tax Digital, MTD, self-assessment. No Comments on Making Tax Digital Expands

Self-employed people and landlords with an income between £20,000 and £30,000 will be required to use Making Tax Digital (MTD) from 6 April 2028. This will bring a further 900,000 low-income taxpayers under the MTD regime.

HMRC previously stated that those with an income between £20,000 and £30,000 would be mandated before the end of this parliament. The specific start date of April 2028 is therefore earlier than expected.

Timing

Taxpayers with an income of more than £50,000 will be mandated from 6 April 2026 for the 2026/27 tax year. The deadline for finalising MTD obligations for this year is not until 31 January 2028, which doesn’t give HMRC much time to sort out any problems before the new cohort of taxpayers join the system in April 2028. At present:

  • Unrepresented taxpayers with an income between £20,000 and £30,000 are going to need software that is either free or low-cost.
  • The availability of such software is quite limited, although more options might become available by April 2028.

The relevant income for meeting the £20,000 threshold will be that for the 2026/27 tax year.

In the future, the MTD threshold might be lowered again as the government has stated there are plans to expand the regime to include those with an income below £20,000.

Self assessment

HMRC has also announced that the year-end self assessment tax return must be submitted using MTD or other suitable software. It was previously thought that taxpayers would be able to use HMRC’s online service, but this is not going to be the case.

When selecting suitable MTD software, it is important to make sure it can also deal with the tax return submission. If the MTD software cannot do this, a different software package will be required to complete the year-end requirement.

HMRC’s list of software that’s compatible with MTD for income tax can be found here.

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What’s new on MTD?

Written by admin on . Posted in Landlord, Making Tax Digital, MTD, self-assessment, Self-Employed. No Comments on What’s new on MTD?

A busy start for HMRC on Making Tax Digital (MTD) for 2025 with focus falling on new guidance for three-line accounts and joint property income.

Self-employed individuals and landlords with an annual income of more than £50,000 will start using MTD from 6 April 2026. The £50,000 test is based on overall self-employed and property income for the current 2024/25 tax year.

Three-line accounts

HMRC has confirmed a three-line account approach:

  • Currently, when completing a self-assessment tax return, self-employed individuals and landlords whose income from either self-employment or property is below the VAT registration threshold of £90,000, need only enter one figure for total expenses.
  • Therefore, keeping digital records for MTD should be a matter of classifying amounts as either income or expense.
  • Each quarter, only the total income and expense figures will be submitted to HMRC.

The one exception is when a landlord incurs residential finance costs, which must always be recorded separately because they are not a deductible expense.

Joint property income

Joint property owners only need to record their share of the property’s income and expenses. If a landlord chooses to, they can simply record income on a quarterly basis and expenses on an annual basis at the end of the tax year. Individual transactions will not have to be captured; only a total figure for each income and expense category.

If the joint property owner is eligible to use a three-line account approach, it gets even simpler. A total quarterly income figure and a total expenses figure at the year end. Recording and reporting will then be:

  • Each quarter: record a single income figure and submit to HMRC.
  • End of the tax year: record a total figure for expenses and report through the end-of-year finalisation process.

HMRC’s guidance on the categories of income and expenses that need to be included in quarterly updates (if a three-line account approach is not used) can be found here.

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Property purchasing could get costlier……………

Written by admin on . Posted in Landlord, Property, SDLT, Stamp Duty. No Comments on Property purchasing could get costlier……………

Although a late reprieve cannot be completely ruled out, the stamp duty cost of purchasing a property in England and Northern Ireland is set to go up from 1 April 2025.

Stamp duty costs have risen now that the temporary £250,000 nil rate threshold has reverted back to £125,000, the pre-23 September 2022 level. First-time buyer discounts will also fall to previous rates.

Landlords

The reduction of the stamp duty threshold from £250,000 to £125,000 will mean an additional cost of £2,500 for anyone purchasing a property costing £250,000 or more as the extra £125,000 of the purchase price is brought into the 2% tax charge.

For landlords, this will come on top of the 2% surcharge increase introduced for purchases from 31 October 2024 onwards. They will have seen their stamp duty cost on, for example, a £350,000 property purchase go up first from £15,500 (pre-31 October 2024) to £22,500 (currently), then to £25,000 (from 1 April 2025) – a more than 60% increase.

First-time buyers

The temporary discounts currently in place mean that first-time buyers in England and Northern Ireland do not pay stamp duty on property purchases costing up to £425,000. So:

  • For purchases costing between £425,000 and £625,000, duty at the rate of 5% is paid only on the excess over £425,000; and
  • No relief is available if the purchase price exceeds £625,000.

From 1 April 2025, the nil rate threshold will be reduced to £300,000, with the higher limit cut to £500,000. The rate will be at 5% where a property costs between £300,000 and £500,000.

Those purchasing property at prices just over £500,000 from 1 April 2025 will need to negotiate for a discount. For example, a £1,000 reduction on a purchase originally priced at £501,000 will save £5,050 in stamp duty.

The online calculator for the amount of stamp duty payable on a property purchase in England and Northern Ireland can be found here.

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Stamp duty hit for landlords

Written by admin on . Posted in Landlord, Leasehold, SDLT. No Comments on Stamp duty hit for landlords

UK landlords are facing increased rates of surcharge when purchasing buy-to-let property following increases over the past three months. The rate is now particularly punitive for those buying property in Scotland.

Stamp duty was devolved to the Scottish and Welsh Governments in 2015 and 2018 respectively. Rather than stamp duty land tax (SDLT), Scottish property purchasers now incur land and buildings transaction tax (LBTT), with land transaction tax (LTT) paid in Wales.

Increased rates

The surcharge increases are as follows:

  • For SDLT, the surcharge is 5% (previously 3%) for purchases from 31 October 2024 onwards.
  • For LBTT, the surcharge is 8% (previously 6%) for purchases from 5 December 2024 onwards.
  • For LTT, the surcharge is 5% (previously 4%) for purchases from 11 December 2024 onwards.

The top rate of duty in England, Northern Ireland and Wales is now 17% where property costs more than £1.5 million. In Scotland, it is 20% payable once a property costs over £750,000.

For a buy-to-let property costing around £450,000, this means landlords in England and Northern Ireland must now pay SDLT of £32,500. For Scotland, the figure is considerably higher at £54,350, and for Wales, a landlord will pay £36,200.

From 1 April 2025, the SDLT figure will rise further by £2,500 to £35,000 when the nil rate threshold reverts to £125,000 after a temporary increase to £250,000.

Adventurous alternatives

Two ways in which more adventurous landlords can drastically reduce the amount of stamp duty payable is by buying mixed-use property (such as a shop with a flat above it), or by buying a commercial property and obtaining planning permission to convert the property into residential use. Both suggestions work equally well in Scotland and Wales. Conversion is a complex area, however, and expert advice is recommended.

In both cases, duty will only be charged at non-residential rates, so, for that £450,000 property outlined above, the cost will be reduced to £12,000 in England and Northern Ireland, to £11,000 in Scotland and to just £10,250 in Wales.

Online calculators for the amount of duty payable on a property transaction can be found here:

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EPC upgrade work

Written by admin on . Posted in Landlord, Leasehold, Property. No Comments on EPC upgrade work

Rental property has been set a government target to meet an energy performance certificate (EPC) rating of C by 2030. Although new funding in support of this initiative has been announced, the grants will not help all landlords.

Around a third of rental properties were built before 1919, many with solid walls. Such property will be particularly difficult to bring up to an EPC C rating. From 2030, it will not be possible to legally rent out a property without such a rating.

Grant conditions

From 1 April 2025, a grant of up to £30,000 will be available for a landlord to improve their first rental property. This funding will be capped at £15,000 for energy performance upgrades and £15,000 for low carbon heating:

  • For second and subsequent properties, the overall grant will be capped at £15,000, with the landlord having to contribute a corresponding amount (or more).
  • If a property is situated within an eligible postcode area, it will automatically qualify for a grant. Around half of England’s postcode areas qualify, selected on deprivation factors.
  • Other properties will qualify if rented to tenants who receive certain means-tested benefits (such as universal credit or housing benefit), or the tenants’ annual gross income is less than £36,000.

There is no limit on the number of properties for which a landlord can claim grants, but the overall maximum funding per landlord will be £315,000.

Properties will only qualify for a grant if they have an EPC rating between D and G. After upgrading, a property should reach a C rating wherever possible.

Upgrades

Upgrades include:

  • Low carbon heating: Clean heat measures such as heat pumps or high retention storage heaters. Older properties may, however, be unsuited to heat pumps, and the current method of calculating EPCs could result in a lower rating if a heat pump is installed.
  • Energy performance upgrades: Measures such as double/triple glazing, insulation, draughtproofing, solar panels and smart heating controls.

A detailed explanation of the available grants can be found here.

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Thoughts for buy-to-let owners selling up

Written by admin on . Posted in Capital Gains Tax, Income Tax, Landlord, Leasehold, self-assessment. No Comments on Thoughts for buy-to-let owners selling up

While the higher rate of capital gains tax (CGT) on residential property disposals has dropped by 4%, from 28% to 24%, from 6 April 2024, the vast majority of landlords who sell up are facing a higher CGT bill when compared to two years ago.

Buy-to-let landlords may be selling because of the implications of the Renters Reform Bill, while furnished holiday homeowners will see their advantageous tax benefits removed from April 2025.

Higher CGT bills

Landlords will generally be worse off despite the 4% rate cut, because it generally doesn’t compensate for the recent reduction of the annual exempt amount from £12,300 to £3,000.

  • Basic rate taxpaying sellers: will be worse off as the lower rate for gains falling within the basic rate tax band is unchanged at 18%.
  • Higher/additional rate taxpaying sellers: with a gain of less than £68,000, will be worse off; such as newer landlords who have benefited from less price growth and northern landlords where property values are generally lower.

Only higher and additional rate taxpayers with a gain in excess of £68,000 will find themselves better off.

Already sold up

 Landlords who have already sold their property and face a CGT liability at the previous higher rate of 28% could consider a risky strategy of potentially benefiting from the 4% rate reduction – by deferring the gain through an enterprise investment scheme (EIS). The gain will come back into charge when the EIS investment is realised.

There are two main risks associated with this plan:

  • EIS investment risk: some or all of the investment could be lost; and
  • CGT rate change: the rate of CGT could go up again by the time the gain comes back into charge.

While not worth it solely for the rate reduction, this is a useful bonus if considering an EIS investment for the 30% income tax relief.

HMRC’s guide to tax when you sell property can be found on the government website.

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New lease and advertising rules for landlords

Written by admin on . Posted in Freehold, Landlord, Leasehold. No Comments on New lease and advertising rules for landlords

If enacted in its current form, the recently published Leasehold and Freehold Reform Bill will affect landlords in England and Wales who own a leasehold property.

Extending a lease

The government’s intention is that the standard term given when extending a lease will be 990 years. The extension term for flats and apartments is currently 90 years.

The initial lease term for leasehold property could be just 99 years. For a new landlord, this might seem fine, but it is generally not a good idea to let a lease run down until there is less than 80 years remaining. Not only will it (currently) be more expensive to extend, but such a property could be difficult to sell or remortgage.

There are various other changes, with two of the more important being:

  • The reduction of ground rent to a peppercorn (virtually zero) upon payment of a premium.
  • The removal of the ‘marriage value’, which can make it more expensive to extend a lease where the lease term has run down. The marriage value reflects the additional market value of having a longer lease. Currently, there is only certainty of avoiding marriage value if a lease has more than 80 years to run.

Ground rent is of particular concern if it doubles every ten years or at more frequent intervals.

Advertising

More detail will now be required when advertising property, regardless of whether it is let privately or via an agent. Many landlords and agents will already provide much of the mandatory information, but landlords letting privately might overlook such items as:

  • Details of the property’s utilities, or lack of;
  • Available parking;
  • Issues with mobile coverage;
  • Flood risk; and
  • Accessibility facilities.

These new measures will now give prospective tenants as much information as possible prior to viewing.

A quick guide for landlords advertising a property can be found here.

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