The aim of HMRC’s ‘Making Tax Digital’ initiative is to transform the UK into one of the most digitally advanced tax administrations in the world, whilst also making it easier for individuals and businesses to get, and keep, their tax situations in order.
A roadmap has recently been set out via an announcement that all landlords and the self-employed must file quarterly returns from 2023, with companies not far behind. With this in mind, it was interesting to read an article on the Telegraph website which outlined that the number of landlords being caught out for underpaying on their tax bill more than halved last year. However, experts have warned that the crackdown will ramp up as the Government seeks to claw back funds after its coronavirus spending splurge.
The article went onto say that HMRC identified 7,362 landlords who had underpaid or not paid income tax between 2019 and 2020, according to figures obtained under the Freedom of Information Act. This was 55 per cent less than the previous year when 16,318 property owners were caught out. The hunt for unpaid tax on rental income is part of HMRC’s Let Property campaign, which encourages landlords to voluntarily disclose anything they owe.
HMRC launched the probe into landlord income in 2013 and since then we have seen many tax, policy and regulatory changes throughout the buy-to-let sector, all of which have had some impact on the way landlords operate. Other influencing factors - such as the recent rise in the stamp duty threshold - continue to change the outlook for landlords and their future plans.
The BTL marketplace is one which will always generate opportunities and have challenges thrown at it. When operating within such fluid sector, it’s vital that landlords don’t ignore the fundamentals when managing their portfolios and keep fully up-to-speed on any new rules that come into force. Take capital gains tax (CGT) for example.
The 2020-21 tax year brings a significant change to how capital gains tax is paid. Landlords must now declare and pay any CGT liabilities using the government’s new online service within 30 days of selling the property. The government is also tweaking the rules around private residence relief and letting relief on CGT bills. These two deductibles are only available to landlords who once lived in the investment property themselves, so they won’t necessarily apply to a large proportion of buy-to-let landlords, but this is something that all landlords should be aware of.
Calculating the net profit of a portfolio and tracking potential capital gains and inheritance tax exposure on an ongoing basis can be a complicated matter. However, there are now a range of online tools. Such as Lendlord, which can help support landlords in collating and centralising key data to provide valuable insight on minimising tax implications and maximising profits on individual properties and portfolios.
Access to real-time and actionable information will help landlords to successfully navigate the current economic climate and any regulatory, policy or tax changes. Whether this be mortgage payment holidays, protecting their investments, supporting tenants where possible or impending tax changes.
The successful integration of the right kind of technology will help landlords save time, make smarter decisions and ensure that their tax demands are less taxing – a winning combination I’m sure you’ll agree.
