The new tax year brings with it updated rules and regulations that can significantly impact the way you manage your properties and, ultimately, your finances.
As your trusted advisers, we’re here to provide a clear and concise overview of what these changes mean for you as a landlord. We’ll cover the latest on capital gains tax and stamp duty, and how you’re affected whether you operate as an individual or a company.
Along the way, we’ll also share some essential tax-saving tips to help you maximise your returns.
What’s new with capital gains tax?
Capital gains tax (CGT) remains a hot topic for landlords, especially following recent adjustments. For the 2024/25 tax year, the higher rate of CGT on residential property gains has been reduced from 28% to 24%. The lower rate will remain at 18%. If you’re planning on selling a property that’s not your main home, these changes could affect the tax you owe.
One significant adjustment is the reduction in the final period exemption, which now only applies to the last 9 months of ownership (down from 12 months in previous years). This means if you’re selling a property that was once your residence, you have a shorter buffer period to benefit from tax relief on your final months of ownership.
Tax-saving tip: If you’re considering selling a property, timing your sale to maximise the use of reliefs can reduce your CGT liability. Additionally, remember to deduct any allowable expenses, such as enhancement costs, to potentially lower the gain.
Stamp duty update
The stamp duty thresholds have received considerable attention, especially as they influence investment decisions and market dynamics. For landlords, the higher stamp duty rates on additional properties remain in place. However, the additional 3% surcharge that applies to purchases of additional residential properties has not increased.
What this means for you is that planning your purchases strategically remains crucial. The cost of acquiring new properties continues to demand careful financial planning.
Tax-saving tip: Consider the timing of your acquisitions to benefit from any potential future relaxations in stamp duty rates, which are occasionally offered to stimulate the housing market.
Corporation tax and income tax implications for landlords
The decision on whether to manage your rental properties through a corporate structure or as an individual significantly influences your tax treatment.
The corporation tax rate is 25% for profits over £250,000. However, for smaller companies with profits under £50,000, the rate remains at 19%, which might be more favourable compared to the higher income tax bands that apply to individual landlords.
Operating through a company might offer not just potential tax savings but also benefits in terms of managing liability and raising finance. The choice depends on your specific circumstances, including your income level and personal tax situation.
Tax-saving tip: Assess the total tax and administrative costs of different holding structures to decide whether individual or corporate ownership suits your situation better. It’s also wise to consider the implications of withdrawing profits from your company, as these can be subject to additional taxes.
Wrapping up
As we move forward into the 2024/25 tax year, staying informed and proactive in your tax planning is more important than ever. With the right strategies, you can not only comply with the new rules but also take steps to protect and grow your investments.
At Simpson Wreford, we understand that these updates may raise more questions about your specific situation. We encourage you to discuss your property portfolio in detail. We aim to ensure you feel confident and informed about the decisions you make as a landlord. Remember, we’re here to help you make the most of your property investments with smart planning and timely advice.
Contact us to discuss your properties.