Property investments once again hit by new tax rules
In the last few years the property sector has been hit by a number of new tax rules, but now there are two new things on the horizon that landlords must consider.
The current Rent-a-Room scheme offers people up to £7,500 a year tax-free from letting out a spare room.
However, HM Revenue & Customs (HMRC) has revealed new plans to introduce a shared occupancy test, which would restrict the allowance to those landlords who are living and physically present in the property during the letting period.
For those letting out their whole property, this may mean that they are required to pay additional tax, while for some it may mean that it is the first time they are charged tax on their property rental.
The government will include legislation for the shared occupancy clause in the Finance Bill 2018 to 2019 and the change will take effect from 6 April 2019.
Let Property Campaign
Concerned that some landlords may not be paying the correct amount of tax on their rental property, HMRC has also launched the Let Property Campaign.
This will give landlords the chance to disclose any unpaid tax in the UK or abroad, allowing them to get up to date with their tax affairs.
Similar to other recent disclosure campaigns, once the tax is disclosed landlords have 90 days to calculate and pay what they owe. Full and voluntary disclosure of all unpaid liabilities will usually lead to a lower penalty for unpaid tax.
If a person does not come forward and HMRC discovers that tax is due, it may be harder to convince them that it was simply a mistake and they could find that a higher penalty could be applied – including fines of up to 200 per cent of tax due or criminal prosecution.
To take part in the Let Property Campaign a person should:
• tell HMRC that they want to take part in the Let Property Campaign
There is no disclosure ‘window’ requiring a landlord to disclose what they owe by a specific date and HMRC have confirmed that the campaign will be ongoing for some time.
For more information, contact Baines Jewitt on 01642 632032