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Tax changes for landlords in 2022 - what is being introduced?

In an ever-changing sector with a raft of new regulations, it’s imperative for landlords to be aware of changes directly affecting them. As we settle into 2022, there are some key tax changes that landlords need to know about so they can avoid any repercussions and ensure they’re remaining compliant.

Self-assessment tax return deadline

Monday, January 31 is the deadline for the online self-assessment tax return for the 2020-2021 tax year but due to Covid-19 pressures, late filing and late payment penalties will be waived for one month for self-assessment taxpayers.

The change means those who cannot file their return by the January 31 deadline will not receive a late filing penalty if they file online by February 28 2022. This also means those who are unable to pay their Self Assessment tax by the January 31 deadline won’t receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by April 1.

Even though the waiver is in place, it is still recommended that landlords complete the self-assessment tax return by January 31. The 2020-2021 tax return is the first tax year on which the new mortgage interest tax relief credit applies.

New mortgage interest tax relief credit explained

The new mortgage interest tax credit is quite controversial as it leaves many landlords with a higher tax bill. Before borrowing money through a buy-to-let mortgage was considered a major tax advantage, but the new changes which apply this year have impacted how much tax landlords now must pay.

Since April 2020, landlords can no longer deduct any of their mortgage expenses from their rental income to lower their tax bills. Now, landlords receive a tax credit, based on 20% of their mortgage interest payments.

The new tax credit is considerably less generous than the previous system for higher-rate taxpayers, who received 40% tax relief on their mortgage payments. This new tax relief system has been gradually phased in since 2017.

How the tax credit affects higher and additional rate taxpayers

The new tax credit might not be popular for landlords who are higher or additional-rate taxpayers as they will no longer be able to claim the tax back on their mortgage repayments, as the relief only refunds tax at the basic 20% rate, instead of the top rate of tax paid.

The new system could also push some landlords into a different tax bracket, as they must declare the income that was used to pay the mortgage on their tax return.

This could raise a landlord’s total income into the higher or additional rate tax brackets, depending on their income from other sources, such as their salary or pension.

More time to file Capital Gains Tax

In the Autumn Budget, Chancellor Rishi Sunak announced changes to the filing deadlines for reporting and paying capital gains tax on the disposal of properties. The new system means landlords will have 60 days to report and pay their Capital Gains Tax bill when selling a buy-to-let property, instead of the 30 days in the previous system.

Sunak has also already made it clear that he will not be implementing much-feared fundamental changes to CGT rates anytime soon.

Here at Holland Properties, we have been an established estate and letting agent since 1999 and can help to manage your tenancies, allowing you to get the most from your rental properties as a result. We operate in Docklands and the surrounding areas including Surrey Quays and Rotherhithe.

For further guidance on any part of the lettings process, please contact us today. You can also request a free and instant online valuation to see how much rent you could be charging in the current marketplace.