The number of buy to let landlords has increased in recent years and inevitably this has attracted the attention of HMRC. George Osborne has announced a number of changes that will increase the tax paid by landlords.

From April 2016 there will be a 3% surcharge on stamp duty land tax payable by anyone buying second or subsequent properties. This increase in costs may deter some prospective buy to let landlords.

There will also be a restriction on the ability to offset mortgage interest. By 2020 landlords will only be able to offset mortgage interest at the basic rate of income tax. This is being introduced gradually from April 2017 so landlords need to consider how this affects their tax position.

Higher rate tax payers will pay more tax as the relief for finance costs will be restricted to the 20% rate. Even basic rate taxpayers may be affected as the interest charge will be excluded when calculating the taxable income, so anyone near the basic rate tax limit may find that they will exceed the limit and have some of their income taxed at the higher rate.

There are also going to be changes to the reporting and payment dates of capital gains tax (CGT) on the sale of residential properties. CGT is currently reported on the annual tax return but as part of the change from personal to digital tax accounts from April 2019 the capital gain will have to be declared and paid within 30 days of the property sale.

Landlords should therefore take advice about their future plans.

Last year the Chancellor announced the introduction of digital personal tax accounts., which will eventually replace the need to submit annual tax returns.

All personal taxpayers will have personal tax accounts by next year, as will over five million small businesses. This will allow them to have immediate access to their tax accounts so they should know the latest tax position and avoid year-end surprises.

From April 2018 all businesses, including the self-employed and landlords, will have to update their tax accounts every quarter where it is their main source of income or worth more than £10,000 per annum. How this will work in practice is as yet unknown.

This may not be a problem for VAT registered business as they already submit information quarterly or those using accounting software, but for small businesses that currently only have their accounts prepared annually this will be a big change which could be more onerous and costly.

It is also likely that once HMRC have access to quarterly income information they will want to bring forward the date tax has to be paid, which will affect business cashflow.

If you are worried about the impact on your business, or would like further advice, please contact us.

From April 2016 all workers who are 25 or over will be entitled to the new National Living Wage (NLW) of £7.20 per hour. If they are currently earning the minimum wage this equates to an increase of £975 per year. The NLW is planned to increase to £9 per hour by 2020.

Employers therefore need to review their business plans / budgets to ensure that they can fund the increase. All employers will need to decide whether they can increase prices or whether they will be forced to cover the increased costs themselves. If so will it affect the number of staff they are able to employ?

If you need advice or help with your planning, please contact us.