Budget 2021 implications for landlords

Stamp duty – the expected extension to the stamp duty holiday was delivered, taking it to 30 June, allowing sales already in progress to be completed, qualifying for savings of up to £15,000 on the first £500,000 of the property price. It will continue to apply to properties up to £250,000 until September. 

 

The holiday will apply to purchases of buy-to-let and second homes, although the 3% surcharge that came into effect in April 2016 will still be payable. For property investors interested in extending their portfolio this will continue to represent a significant saving. 

 

Capital Gains Tax – the tax on the increased value of your rental property when you sell it has been frozen. 

 

The government reviewed this tax in 2020 when the Office of Tax Simplification recommended it should be increased to bring it in line with income tax rates and that the annual allowance before the tax applies should be reduced. 

 

In the Budget it was announced the current Capital Gains Tax annual exempt amount will be maintained at its present level of £12,300 until 2026. This will apply to individuals, personal representatives and some types of trusts for disabled people. The exempt amount will be £6,150 for trustees of most settlements. The rates chargeable above this amount for sales of residential property remain at 18% for basic rate taxpayers and 28% for higher rate taxpayers. 

 

Corporation Tax – if you manage your rental properties through a business corporation tax will increase from 19% to 25% in 2023 for companies with profits of £250,000 or more. However, businesses with profits of £50,000 or less will continue to pay 19%. 

 

Businesses will be able to offset their tax liabilities against losses over the last three years, up to £760,000. 

 

Property taxes – property developers will pay a new tax from April 2022 to raise funds towards the cost of replacing unsafe cladding on high-rise buildings. A consultation was announced in the Budget on a new planning levy for future high-rise developments. 

 

Income tax – the threshold for income tax will be frozen from next year until 2026 at £12,570 for the basic rate and £50,270 for the higher rate. 

 

If you would like to know more about the implications of the 2021 Budget for landlords please get in touch.