Tax changes for landlords: April 2023
The new tax year begins on 6th April and with it comes a host of tax changes. In this blog, we’ve summarised the key tax changes that landlords need to know about.
CGT tax-free allowance cut
The Capital Gains Tax (CGT) Annual Exempt Amount - a tax-free allowance that each individual has - will be reduced from the current £12,300 to £6,000 from 6 April 2023. This will be reduced further to £3,000 from 6 April 2024.
This change will affect everyone selling a property, disposing of shares or other assets subject to CGT. The lower allowance also means that more ‘disposals’ will get caught by capital gains tax.
This is not great news for landlords looking to sell property and is particularly significant for those who own a property jointly. Where previously you would have had £12,300 CGT allowance each - £24,600 in total tax-free - you will now only have £6,000 in total from April 2024.
Dividend allowance cut
Currently every shareholder in the UK has a £2000 tax-free dividend allowance. This is being halved from 6 April 2023 to £1000, and then halved again in April 2024 to £500.
Landlords investing in property through a limited company will no doubt be concerned about increased taxation and reduced allowances. Some landlords who take profits out of their limited company may find they are paying as much tax as they would in their personal name. Others, who are happy to leave profits in their company to reinvest, may not be impacted as much by the changes.
From a planning perspective, landlords may want to start thinking about their company structure. It might be more tax efficient to restructure their company completely, adding different shareholders and creating a family trust. Alternatively, landlords could revisit their strategy and reinvest proceeds to increase their portfolio, rather than taking profits out.
If you need advice on your company structure or strategy, our property tax experts are here to help. Book a tax consultation
Making Tax Digital delayed until 2026
Making Tax Digital (MTD) for Income Tax was due to come into force in April 2024 and would have impacted landlords earning more than £10,000 in rental income.
On 19th December, the government announced it was postponing MTD for income tax by two years and also increased the income threshold from £10,000 to £50,000 in 2026, and £30,000 in 2027.
Landlords in scope for MTD in 2026 or 2027, have plenty of time to prepare for the change to digital record keeping. The two-year delay and change to thresholds gives everyone affected a chance to get ready without it being a shock to the system given the current climate. In our experience, landlords who keep regular records tend to operate more tax-efficiently as they’re more likely to remember to claim tax relief for all of their qualifying outgoings.
Stamp Duty Land Tax nil-rate threshold increase will end in March 2025
Whilst this does not come into force for another two years, it’s worth landlords and property investors being aware of the Stamp Duty Land Tax rate reverting to the original rate from 1 April 2025.
The SDLT rate was cut in the Mini Budget as a “permanent reduction” and the reversal was announced in the 2022 Autumn Statement. The government said it is keeping the rate cut in the short term to boost the property market during the downturn and cost of living crisis.
Current SDLT rates
| Property price | Standard stamp duty rate | Current buy-to-let stamp duty rate |
|---|---|---|
| £0-£40,000 | 0% | 0% |
| £0 to £250,000 | 0% | 3% |
| £250,001 to £925,000 | 5% | 8% |
| £925,001 to £1.5m | 10% | 13% |
| £1.5m+ | 12% | 15% |
Original SDLT rates (from 1 April 2025)
| Property price | Standard stamp duty rate | Buy-to-let stamp duty rate from Apr-25 |
|---|---|---|
| £0-£40,000 | 0% | 0% |
| Up to £125,000 | 0% | 3% |
| £125,001 to £250,000 | 2% | 5% |
| £250,001 to £925,000 | 5% | 8% |
| £925,001 to £1.5m | 10% | 13% |
| £1.5m+ | 12% | 15% |
There is a good window of opportunity for SDLT savings on property purchases or when incorporating properties into a limited company. There could be a very busy end of 2024 as landlords (and homeowners) rush to buy before the window closes and the threshold increases.
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