Important tax changes that landlords need to know for 2021

10th March 2021

Landlords are facing many property tax changes which they need to be aware of in 2021. Along with this, the impact of the Coronavirus pandemic and Brexit certainly has and will continue to cause disruption to the property market. We have summarised the key changes that landlords will be facing this year and must know about.

As of April 2020, landlords are no longer able to deduct any of their mortgage expenses from rental income to reduce their tax bill. Instead, landlords are only able to offset 20% of their mortgage interest payments when completing their annual tax returns. There have been significant changes in the way that landlords must declare their rental income since 2017 which is how the new government system has been phased in gradually. According to Property Master, it was found that one in five landlords were unaware that this is the last year they are able to deduct any of their mortgage expenses from their rental income which clearly shows that landlords might be unprepared for these changes coming into force. If you are a landlord, this rule is most likely to increase your tax bill considerably and has been a key reason why landlords have decided to reduce their portfolios.

Another major change that landlords need to be aware of is how capital gains tax is paid. If you have sold an investment property, you will usually have to pay a certain amount of capital gains tax which is dependent from the profit that you make. Landlords have always been able to declare their capital gains tax liabilities in the following tax years return, however the changes for 2020-21 tax year, are that these liabilities must now be declared using the government’s new online service within 30 days of selling the property.

The government are also altering the rules on private residence relief. Currently, you are exempt from paying capital gains tax for the final 18 months that you owned the property if it was once your main residence (and even, if you had rented it out to tenants). Whereas, as of 2020-2021 tax year, the new rules have cut the period from 18 months to just 9 months.

If you are a landlord and need expert advice, please get in touch by calling 01392 424242 or email .