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Landlords - Tax rates and allowances for 2021/22 Updated

Landlords - Tax rates and allowances for 2021/22 Updated

Author: Rowena Kelly

Rita4Rent Michael Wright 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.

Rita4Rent Michael Wright 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.

Note: dividend tax rates are 7.5%, 32.5% and 38.1% respectively.
* Where your adjusted net income exceeds £100,000 your personal allowance will reduce by £1 for every £2 you exceed it by.
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 £1,260 £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
* Restricted to £3,750 if jointly owned property.

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 18% 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 profit 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
*first time buyers -£300,000+
From 1 Aug to 30 Sept 2021
5%
N/A
£125,000 - £250,000 From 1 Oct onwards
2%
N/A
£250,000 - £925,000
*first time buyers £300,000+
From 1 Oct 2021 onwards
5%
N/A
£925,000 - £1,500,000 10% 10%
£1,500,000 + 12% 12%

*First time buyers pay 0% up to £300,000 on properties of value up to £500,000, for 2021/22

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.

Additional 2% surcharge on non-UK residents purchasing residential property in England and Northern Ireland

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 £175,000
Spouse Exemption** Unlimited Unlimited
Lifetime Rate*** 20% 20%
Death Rate 40% 40%
*note this relief gets tapered down for estates worth £2mil+ by £1 for every £2 you exceed it.
** Where the spouse is non-domiciled to the UK, the spousal exemption is restricted to £325,000.
*** A lifetime rate of inheritance tax may be charged on transfers into a trust.

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.

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