Understanding Your Tax Responsibilities

If you’re a landlord, do you know how much tax you should be paying and how it is calculated? Recent changes to mortgage interest relief and capital gains tax have left many landlords confused. A report in the press today highlights a widespread lack of knowledge on tax obligations among landlords.

Do You Need Professional Help?

Landlords who use an accountant can rely on their expertise, but those managing a single property or a small portfolio may need to complete their own tax forms. If that’s you, it’s crucial to understand how the latest rules apply to your rental income and property sales.

Changes to Mortgage Interest Relief

A recent survey published by Landlord Today reveals that one in six landlords doesn’t realise that this will be the last time mortgage expenses can be deducted from rental income. From the 2020-21 financial year, mortgage interest relief has been fully replaced with a tax credit based on 20% of mortgage interest payments.

Capital Gains Tax: What You Need to Know

The same survey found that only four in ten landlords were aware of the new Capital Gains Tax (CGT) rules. If you sell a property that isn’t your main home, you must now inform HMRC using their online service and pay any tax due within 30 days of completion. Despite this, more than a third of landlords still believed they could wait until their next tax return to declare and pay CGT.

Penalties for Late Payment

Misunderstanding tax rules can be costly. One in ten landlords surveyed thought they had six months to settle CGT payments, which is incorrect. HMRC does offer some flexibility, allowing payment in instalments or accepting late payments in certain cases due to Covid-related reasons. However, ignorance of the law is not a valid excuse, and late payment fines can add up quickly.

v

To avoid unnecessary fines, landlords should stay informed about tax changes. If you’re unsure about your obligations, speak to your accountant or contact your local tax office for advice. Ensuring you pay what you owe on time will help you avoid financial penalties and stay compliant with tax regulations.