The new tax year, starting on 6 April, could hike up some landlords' tax bills and produce a windfall for other people, with a raft of changes being introduced for the 2022-20 tax year.
As of 6 April, landlords might find mortgage interest tax relief phased down, even while higher allowances for income and capital gains start working.
But the entire year ahead will also bring numerous regulatory shake-ups that may hit landlords' bottom lines.
We explain how tax and regulatory changes could affect your buy-to-let property this season.
Buy to-let tax changes for landlords
1. Mortgage interest tax relief phased out
Up until April 2022, landlords were able to deduct the interest paid on their own mortgage using their rental income, bringing down their overall tax bill.
Over yesteryear two years, however, it has been slowly eliminated. For the 2022-20 tax year, you'll only be in a position to deduct 25% of your mortgage interest. And from April 2022, you won't be able to deduct any.
Instead, the government has introduced a 20% tax credit – in 2022-20, you can apply this to 75% of the mortgage interest.
If you're a basic-rate taxpayer, you'll find themselves in exactly the same position. But if you are a higher- or additional-rate payer, you'll end up paying significantly more tax in your mortgage interest.
2. Personal allowance goes up
In a little bit of great news, the personal allowance is booming within the 2022-20 tax year, from lb11,850 to lb12,500. This is the amount of income you can earn before you spend money tax, meaning you can keep more of your profits.
As a result, the higher-rate threshold is also rising, to be able to earn lb50,000 before tipping in to the 40% tax bracket.
Keep in your mind when you earn a lot more than lb100,000, you'll begin to lose lb1 of personal allowance for every lb2 within the limit.
You will discover more in our help guide to tax-free income and allowances.
3. Capital gains tax allowance rising
If you're planning to sell one of your investment properties in the coming year, you may have to pay capital gains tax – but you’ll be able to earn more profits tax-free.
The capital gains tax allowance is going up to lb12,000 in 2022-20, rising from lb11,700 the prior year. For assets you have jointly with your spouse or partner, you can earn up to lb24,000 in profits before you spend money tax.
Any amounts above this is taxed at 18% if you’re a basic-rate payer, and 28% if you’re a higher-rate payer.
4. Last year before CGT shake-up
If you lived in your property before renting it out, the main city gains tax rules are different. You are able to currently let it for 1 . 5 years after leaving before you spend money CGT on a sale. And after this 18 month period, you may benefit from as much as lb40,000 in lettings relief to lower your your bill.
However, this can be the last year that these rules apply. Within change proposed at last year’s Autumn Budget, you'd have only nine months CGT-free after leaving, and lettings relief would only affect landlords who live with their tenants. These changes continue to be under consultation, but would take effect from 6 April 2022.
So, if you have considered selling your former home, it might benefit you to do it before April the coming year. We explain how CGT works within our help guide to capital gains tax on property.
Buy-to-let regulatory changes
5. Letting fees ban
From 1 June, auctions and landlords is going to be banned from charging tenants any fees with regards to lettings.
The costs will now have to be met by landlords, so your bills for signing on a new tenant may go up.
6. Right to Rent challenged
Landlords are currently necessary to execute visa checks to ensure whether tenants have the right to live in the UK, a scheme referred to as To Rent.
But the High Court recently ruled this policy breaches human rights laws. By yet, your obligations haven't changed – and the government intends to appeal the choice – but it might be someone to watch.
7. HMO licensing
After a rule alternation in October last year, hundreds of thousands of landlords are actually considered those who own Home of Multiple Occupancy (HMOs) – which need a license and have stricter requirements.
But to date, merely a fraction of landlords have sought the correct licenses. In Bournemouth, for example, just 572 HMO licenses happen to be issued in the past Twelve months, but the council estimates a further 2,000 properties require one.
If your home is rented to five or more unrelated people, you may now come under the HMO scheme, check together with your local authority to prevent breaching the guidelines.
8. Stricter deposit rules
As of 1 April, all lettings agents is going to be necessary to join a government-approved scheme to safeguard client money, including tenancy deposits and rental income.
To ensure your cash is being protected, make certain your agent has agreed to a scheme.
Buy-to-let and Brexit
The UK’s exit in the EU is looming on 29 March, though uncertainty reigns over Pm Theresa May’s negotiations using the EU and whether an offer or delay will be agreed by parliament.
While it’s unlikely that Brexit will affect the UK’s tax or property regulations, landlords could see an impact around the local property market. Read much more about the possible outcomes in our story on which Brexit means for house prices.