Landlord buy-to-let tax changes

April 20, 2023

With the start of the new financial year in April, there are a few changes buy-to-let landlords need to be aware of involving capital gains and corporation tax.

While some recent tax changes could impact profits, this might mean landlords need to adopt new strategies to offset the impact. Despite the rise in tax regulations, the strong private rented sector and capital growth prospects are still causing a significant proportion of property investors to remain confident.

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Limited companies and corporation tax

Investors purchasing buy-to-lets through limited company structures can benefit from a range of tax advantages. For a growing number of landlords, this has become the preferred option to invest in property. In September 2022, GetGround reported an increase of 150% in the number of transactions completed via limited companies over the previous year.

Limited companies are liable to corporation tax, and there’s a recent change to this which took effect on 6 April 2023. Within the Spring Budget, Chancellor Jeremy Hunt confirmed corporation tax for companies earning more than £250,000 in profits will be 25%, instead of the previous rate of 19%.

This will largely impact property investors with bigger portfolios, but it’s something investors with limited companies need to be aware of. This should also be a consideration for those interested in setting up a limited company to purchase buy-to-lets through.

It’s recommended to speak to a specialist to help you figure out what’s the best way for you to invest in property, and this is something The Prestbury Advisory are able to facilitate.

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Capital gains tax allowance

Capital gains is a tax many people or trusts have to pay when they make a gain on certain assets they’re selling, and there are tax reliefs you can claim for this too.

From 6 April 2023, the capital gains tax-free allowance will be reduced, which was a change first announced in the Autumn Budget. The threshold was previously set at £12,300 and has now been reduced to £6,000.

This means £6,000 is the maximum amount you will be able to receive as a capital gain in the 2023/24 financial year before you have to start paying this tax. The tax-free allowance will then be lowered again to £3,000 from April 2024.

The new change to capital gains could impact some landlords looking to sell their property investments, potentially lowering their profits. This further adds to the importance of thinking long-term with your investments to offset any additional taxes you may have to pay.

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Landlords remain confident

Despite changes across the buy-to-let industry, including increased tax obligations, buy-to-let landlords remain confident about the sector’s future prospects. And many people consider UK property a top investment choice for reliability as property values have remained strong.

Between January 2020 and December 2022, UK house prices increased by 20.4%. This equates to an increase of £48,620 on average, according to figures from Halifax, and shows the strength being seen across the UK housing market.

Recently, Landbay revealed 46% of property investors surveyed claimed they feel positive about the prospects of their buy-to-lets. When giving their reasoning, respondents highlighted high occupancy rates, continued demand and strong rental yields.

In recent years, demand for property in the private rented sector has grown every year, and over the past five years, it has surged by 57%. Across the coming years, the sector will likely further increase in size, providing additional opportunities for property investment.

If you want to know more about the property investment opportunities we have available at The Prestbury Advisory, get in touch with our team today on 01625 725 779, or email us at contact@theprestburyadvisory.com. We can also introduce you to specialist tax advisors to help you make the best decisions for your property portfolio.

Landlord buy-to-let tax changes

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