Landlords - Tax rates and allowances for 2020/21 Updated
*Please note the information in this article may be out of date
Tax rates and allowances relevant to Landlords for 2020/21
Mon, 29 Jun 2020
This Guide was produced by Michael Wright, Landlord Tax Expert at Rita4Rent, who are specialist landlord tax advisors, and the sole recommended tax advisors of the Residential Landlords Association. Michael now writes for Listentotaxman.com on matters relating to property and landlord tax. Rita4Rent are very happy to speak with Listentotaxman visitors to discuss any tax questions they might have – just visit the Rita4Rent website for contact details.
This is a collation of tax and allowances that are relevant to our Landlord visitors.
Income Tax
The tax you pay on your net rental profits, after any losses brought forward are deducted, if you exceed the personal allowance.
| Tax Rates – England & Wales | 2021/22 | 2020/21 |
|---|---|---|
| Personal Allowance * | £12,570 | £12,500 |
| Basic Rate Band of 20% | £37,700 | £37,500 |
| Higher Rate Band of 40% | £150,000 | £150,000 |
| Additional Rate Band of 45% | £150,000+ | £150,000+ |
| Tax Rates – Scotland | 2021/22 | 2020/21 |
|---|---|---|
| 19% Starter rate | £12,571 | £12,501 |
| 20% Basic rate | £14,667 | £14,586 |
| 21% Intermediate rate | £25,296 | £25,159 |
| 41% Higher rate | £43,662 | £43,431 |
| 46% Top rate | £150,000+ | £150,000+ |
| Other Allowances for Landlords | ||
|---|---|---|
| 2021/22 | 2020/21 | |
| Property Income Allowance | £1,000 | £1,000 |
| Rent a Room Relief * | £7,500 | £7,500 |
| Marriage Allowance | £1,250 | £1,250 |
| Dividend Allowance | £2,000 | £2,000 |
| Savings Allowance | ||
| Basic Rate Taxpayer | £1,000 | £1,000 |
| Higher Rate Taxpayer | £500 | £500 |
| Additional Rate Taxpayer | Nil | Nil |
Capital Gains Tax
The tax you may pay when you sell a rental property and make a gain above the annual exempt amount.
| Tax Rates | 2021/22 | 2020/21 |
|---|---|---|
| Annual Exmption | £12,300 | £12,300 |
| Residential Properties | ||
| Basic Rate Taxpayer | 10% | 10% |
| Higher Rate Taxpayer | 28% | 28% |
| Non Residential Properties | ||
| Basic Rate Taxpayer | 10% | 10% |
| Higher Rate Taxpayer | 20% | 20% |
Corporation Tax
The tax you pay on income and gains when you hold the rental property in a company
| Tax Rates | 2021/22 | 2020/21 |
|---|---|---|
| Corporation Tax Rate | 19% | 19% |
Stamp Duty Land Tax (SDLT)
The 2021/22 tax year is a complicated one in Stamp Duty terms. There is a graduated return to normal rates planned, on a phased basis, meaning rates are changing through the year. Being on one side or another of these change dates could be costly if you get it wrong.
The stamp duty holiday (0%) has been extended until the 30th June 2021. After that date, the 0% stamp duty threshold will be reduced from £500,000 to £250,000 for three months, until the 30th September 2021. From the 1st October, the 0% stamp duty threshold will return to £125,000, or £300,000 for first time buyers purchasing a property worth up to £500,000.
Also, a 2% surcharge on non-UK residents purchasing residential property in England and Northern Ireland comes into effect from 1 April 2021. The surcharge will be in addition to the existing 3% Stamp Duty surcharge on purchases of “additional” dwellings such as buy-to-lets and second homes, the flat 15% Stamp Duty rate on purchases of dwellings worth more than £500,000 by companies acting as “envelopes” and the existing stamp duty rates for UK home buyers.
Stamp Duty Land Tax has been replaced by a Land and Buildings Transaction Tax in Scotland and a Land Transaction Tax in Wales.
The tax you pay when you buy a new property.
| Tax Rates | 2021/22 | 2020/21 |
|---|---|---|
| Residential Properties | ||
| £0- £125,000 | 0% | 0% |
|
£125,000 - £500,000 |
Until 30 June 2021 0% |
0% |
|
£250,000 - £925,000 |
From 1 Aug to 30 Sept 2021 5% |
N/A |
|
£125,000 - £925,000 |
From 1 Oct 2021 onwards 5% |
N/A |
| £500,000 - £925,000 | 5% | 5% |
| £925,000 - £1,500,000 | 10% | 10% |
| £1,500,000 + | 12% | 12% |
| Rates are increased by 3% if the property is a second property or purchased in a limited company. In rare cases where a property is valued over £500,000, a 15% rate may be applied. |
||
| Non-Residential Properties | 2021/22 | 2020/21 |
| £0 - £150,000 | 0% | 0% |
| £150,000 - £250,000 | 2% | 2% |
| £250,000 + | 5% | 5% |
Inheritance Tax
The tax you may pay when you die and holding rental property. There are a number of exemptions for IHT.
| Tax Rates & Thresholds | 2021/22 | 2020/21 |
|---|---|---|
| Nil Rate Band | £325,000 | £325,000 |
| Residence Nil Rate Band | £175,000 | £150,000 |
| Spouse Exemption* | Unlimited | Unlimited |
| Lifetime Rate** | 20% | 20% |
| Death Rate | 40% | 40% |
Thank-you to Michael Wright, Director/Owner at Rita4Rent, Property Tax specialist for compiling all this information. Michael, also writes regular guides and articles for Listentotaxman on the subject of Property and Landlord Tax. If you have a query directly for Michael, do go to his website.