Making Tax Digital has arrived – here’s what you need to do

Making Tax Digital (MTD) has finally arrived, having gone live on April 6, 2026, and it is going to change the way those affected need to file their returns to HMRC.

If you are self-employed, receive property income, or both, and have total qualifying income from self-employment and property above £50,000 – remember this isn’t profit, it is income – then you are likely to be an MTD taxpayer. Your total income will include payments from multiple sources, which is especially relevant if you are a landlord with more than one property.

If you’re not sure whether you qualify for MTD, then you can always ask your accountant. In fact, even if you know you qualify, it would be best to speak to your accountant to make sure you comply with all the different changes that MTD brings. Many people think it is just a change in the way you need to file your tax returns. But there is more to it.

Choose your software

Quarterly updates are the big change for people affected by MTD, and this is facilitated by accounting software that allows you to send your quarterly updates directly to HMRC from your system. If you don’t already use accounting software that allows you to send updates directly to HMRC, then you will need to choose it quickly to make sure you don’t miss the first deadline. This will be August 7, 2026, which covers the period from April 6, 2026, to July 5, 2026, if you use standard update periods.

Once you have chosen your software, which could be FreeAgent, QuickBooks or Xero among others, then you also need to link your bank accounts to it, so your transactions are brought into your accounting software and you can reconcile all transactions in one place.

If you haven’t done any of this yet, or you’re still using spreadsheets to do your accounts, then you need to act fast. Making these changes sooner rather than later will give you the information you need, where you need it, when the time to file comes. And planning ahead is much better than trying to make these changes in a panic. Remember, you need to link all your business accounts, if you have more than one.

Why is this so important now?

If you haven’t done any of this before you need to send your first quarterly update, then you will be playing catch-up – and that can become uncomfortable. You need to make sure all the data is flowing as it should be, rather than trying to reconstruct it later.

For the same reason, you should check the data you have already included in your accounting software for your year end. You should check all your expenses are coded correctly, and that all your eligible income is included in the right place.

If you have any personal spending that has gone through the business, you will need to identify this correctly so it isn’t included within your business accounts. You should also make sure there are no duplicated transactions in the accounts, as that can give you errors that might be difficult to unpick later. The closer you can get it to being exactly right before you start your quarterly updates, the better.

Review your accounts each month

If you want to really keep on top of things and ensure you’re doing everything right, then reviewing your accounts each month is a good idea going forwards. Take a day each month where you know you have less work to do, and use it as an admin day where you review your monthly transactions and make sure they are correctly categorised.

The latest accounting software can help you keep on top of your expenses more easily, as you can upload images of your receipts in real time. Taking a snapshot with your phone camera and uploading this will mean you don’t have to go through shoeboxes full of receipts when you get to the end of the quarter. As they can be categorised as you go, you will save yourself a lot of time when you need to send your update to HMRC.

The other important thing to do is decide what your accountant will do, and what you will do when it comes to MTD. It might be that you want to do the monthly bookkeeping, but you ask your accountant to check it for you. Or you may want your accountant to do the monthly bookkeeping, but this is likely to increase your costs. So, have a discussion now before you need to send your first quarterly update, to make sure you know who is doing what. It can save confusion later.

You can find out more about MTD on Gov.uk.

Contact us

If you would like to find out more about MTD and whether you are affected, then please get in touch with us and we will explain what you need to know.

Renters’ Rights Act comes into force from May 1

New obligations for landlords and new rights for tenants are coming into force from May 1 as the Renters’ Rights Act is implemented. The changes are designed to give tenants more rights than they have previously enjoyed, and to ensure landlords are not operating in ways that disadvantage their tenants. But these rules create the biggest shake up of the sector, and there is a lot for both sides to absorb to make sure they don’t fall foul of the new rules.

One of the main changes is that there is no longer a traditional fixed-term tenancy. Typically, tenants were offered a tenancy for maybe six or 12 months by the landlord or the agent operating on the landlord’s behalf. But from May 1, shorthold tenancies of this type, and all new tenancies, will be rolling, without a fixed end date.

This means that to end a tenancy, either the tenant or the landlord must give notice, which creates a more formal process, and makes it much harder for informal tenancies to exist.

What rules have changed?

A Section 21 eviction – known as a ‘no fault’ eviction, was the main way that landlords would evict tenants, as they didn’t need a specific reason to issue one. Now that this has been removed, if a landlord wants to evict a tenant, the eviction must be justified under Section 8.

You might action a Section 8 eviction if there are rent arrears, antisocial behaviour, because the landlord wants to sell the property, or because the landlord wants to move into the property. These changes create a legal process that must be carefully navigated.

There are also changes to how and when rent can be increased. From May 1, you are limited to just one rent increase per year, and tenants must be given at least two months’ notice of any increase.

Landlords also can’t ask for large rental payments upfront under the new rules, with advance rent effectively capped at one month in most cases. Rental bidding wars are also banned, so landlords or agents won’t be able to encourage offers above the advertised rent to secure a property. Tenants also have stronger rights to challenge rent increases they consider excessive, so they don’t have to just accept what the landlord is proposing in terms of a rent increase without having a say.

What else has changed?

Tenants will automatically have the right to ask to have pets in rented accommodation, and the landlord must have a reasonable reason to refuse the request. It isn’t enough for the landlord to say he or she doesn’t want them. Stronger anti-discrimination rules are also being implemented, so landlords can’t refuse tenants because, for example, they have children or receive benefits.

All the changes must be communicated to existing tenants by the end of May this year via a Government leaflet which can be downloaded from Gov.uk. Failing to do this could lead to potential fines.

However, if a landlord has given a tenant notice before May 1, 2026, then these rules may not apply. But if they do apply, then tenants can effectively stay indefinitely, and you need valid legal grounds to remove them.

New rules if you want to sell your property

If you genuinely intend to sell your property, you can serve a Section 8 notice under the updated rules to ask your tenants to leave. But you can’t just use this as a ruse to get tenants out, you must follow through with the sale or face consequences if you don’t.

For example, you would need to instruct an agent, list the property, or show other credible steps towards selling. If you don’t sell, then in most cases you can’t put your property up for rent until 12 months after you served the notice.

You must also give four months’ notice to the tenants if you want to sell, and you can’t give this notice within the first 12 months of the beginning of a contract. So, in effect, if you wanted to sell your property, you would need to wait up to 16 months before you can begin to put it on the market.

One important aspect of the new rules to be aware of is that local councils will be given more powers in relation to rental properties, which includes being able to impose civil penalties of up to £7,000 for a first or minor non-compliance with the rules, and up to £40,000 for serious or repeat non-compliance. Councils will also be able to pursue action through the courts if there is serious or persistent non-compliance, which could lead to an unlimited fine. You can find more information about the new rules at Gov.uk.

Contact us

If you would like to find out how these rules may affect you, whether you’re a tenant or a landlord, and how to deal with them effectively, then please get in touch with us and we will explain what you need to know.

Taxpayers must be careful how they report CGT this year

Taxpayers with capital gains liabilities that they need to declare in their self-assessment tax return need to take extra care this year to avoid receiving a penalty from HMRC.

Changes made to the Capital Gains Tax (CGT) rates part-way through the 2024/25 tax year mean it will be more complicated to determine exactly what rate applies to each gain and, unfortunately, HMRC’s self-assessment software won’t calculate the correct amount for you. Instead, you will need to do this yourself or with your accountant, and the timing of each transaction will make a difference.

So, you will need to speak to your accountant to either help you file your return, or if your return has already been filed, to check that the calculation you have made is correct, as the sooner you remedy any underpayments, the better it is for you.

How did the rates change?

The CGT rates increased from October 30, 2024, which was the day of the Autumn Budget that year, and they applied to the disposal of assets, except for residential property and carried interest.

On that day, the rates increased as below:

• 10% to 18% for basic rate taxpayers.
• 20% to 24% for higher-rate taxpayers.

This created the complication for this year, as taxpayers need to split gains they made at different dates and then calculate the right amount of tax due, based on the relevant rates. They also need to allocate any losses and the annual exemption to gains realised either on or after October 30, to make sure they maximise their tax relief.

Yet despite the change being made by the Government a relatively long time ago, as already mentioned, HMRC’s software cannot do the calculation for you. So, there is an adjustment on the self-assessment form, in box 51, which you should have used to pay the correct amount of tax. If you didn’t, or you haven’t explained your calculations on the form in box 54, then you might need to make a change after filing. This is where your accountant will be able to help you.

Is there any way I can check my calculation?

Yes, HMRC has made a specific adjustment calculator available. But there is one other thing HMRC will be expecting in your tax return – you would need to have included a disclosure if you entered an unconditional contract before October 30, 2024, if it completed after that date.

Elsa Littlewood, private wealth tax partner at BDO, said: “Changing the CGT rates part way through the year has the potential to be a real banana skin for those completing the form and can be particularly tricky for those doing so without professional help. There is a risk that people unfamiliar with the rate changes will unwittingly input the wrong information as the self-assessment form will not automatically calculate the right CGT liability.

“It is helpful that HMRC have released a calculator that can be used to work out the adjustment to capital gains tax, but it would have been better if this was integrated within the tax return software.

“We would hope that HMRC would not charge penalties if tax returns submitted using HMRC’s software are incorrect and the amount unpaid is minor. But there is a risk of mistakes being made and it could lead to a flurry of disputes with HMRC later. Even if you have already submitted your self-assessment form, you may wish to go back and double check it to ensure it’s right.”

We can help you

If you have already filed your self-assessment tax return and think it might be worth revisiting it with us to check everything is correct, then please contact us and we will do everything we can to assist you.

Tax on property income, dividends and savings up 2%

Tax rates on dividends, property income and savings will be raised by 2% from April 6, 2027. This means those paying tax on rental income, will face a basic rate of 22%, rather than the usual 20%; 42% for higher rate taxpayers instead of 40%, and 47% for additional rate taxpayers, up from the usual 45%.

The Rent a Room Allowance is unchanged, and any carried forward property losses must still be offset against property income. Relief for residential property costs will also be calculated at 22% when the rate changes.

When calculating income tax allowances or reliefs, these will be applied first to income that is not generated from property, savings or dividend income. If the allowances or reliefs exceed this type of income, they will then be deducted from these other types of income in the way that is most beneficial for the taxpayer, according to the Budget documents.

What are the new savings and dividend tax rates?

The rates of income tax on savings will follow the pattern of property income tax, at 22%, 42% and 47% for the basic, higher and additional rate taxpayers respectively. The way they are applied will become a little more complicated, as the starting rate for savings income is 0% up to £5,000 for those taxpayers with income up to £17,570 that is not from savings, dividends or property.

The Personal Savings Allowance gives a 0% tax rate on income up to £1,000 for basic rate taxpayers and up to £500 for higher rate taxpayers. These will also apply from April 6, 2027.

The new dividend tax rates will apply earlier, from April 6, 2026, and from that date they will also rise by 2 percentage points. This will put the dividend ordinary rate at 10.75%, the dividend upper rate at 35.75% and the dividend additional rate at 39.35%.

The Budget documents added that the “rate charged to companies under the loans to participators regime is automatically tied to the dividend upper rate and so will also increase to 35.75%”. The dividend allowance will stay at £500.

Claire Trott, Head of Advice at St. James’s Place, said: “Raising dividend, property and savings taxes by 2% only adds further layers to an already overly complicated tax system. Many individuals will now need to rethink how they structure their holdings to remain tax efficient. The justification provided that an extra 2% brings these taxes more in line with the NICs paid on earned income overlooks the fact that business owners are likely to feel the greatest impact, particularly those already affected by earlier NICs increases.

“We now have three separate tests on pension contributions: the annual allowance, the limit on income tax relief, and the new limit on NICs savings. At the same time, income is taxed at different rates depending on whether it is earned, from property, from savings, or from dividends. Layered on top are multiple allowances, many of which taper away as frozen thresholds pull more people into higher tax brackets.”

How do you work out what you need to pay?

Understanding what you need to pay and how each element of the allowances and changes are applied is definitely more complicated than it was. The new, separate rate for property income, will be taxed “after employment, trading and other income but before savings and dividend income”, according to the Budget documents.

Working out your liabilities will be more complicated, and it would be wise to speak to your accountant if you have any uncertainty about what you might need to pay when the new regime is in place.

The Budget documents include an example tax calculation which may help to explain how this new system will work when all new tax rates are in place:

In the tax year the individual has following income:

• employment income (£30,000)
• property income from residential letting (£3,000 share of profit)
• finance cost relief for a rental property (£1,000 share of interest expense)
• interest on savings of £400
• dividend income of £200

The personal allowance and rate bands are unchanged.

Amounts of taxable income after steps one to three:

• personal allowance must be set off against employment income first. Employment income: £30,000 – £12,570 = £17,430

Amounts of Income Tax calculated at step 4 (employment first, then property):

• employment income: £17,430 at 20% = £3,486
• property income: £3,000 at 22% = £660
• savings income: £400 at 0% = £0 (Personal Savings Allowance)
• dividend Income: £200 at 0% = £0 (Dividend Allowance)

Total tax due (step 5):

• employment income (BR): £3,486
• property income (BR): £660
• total tax due: £4,146

Finance cost relief tax reduction at step 6:

£1,000 at 22% = £220

No additional tax charge at step 7.

Total Income Tax due: £4,146 – £220 = £3,926

Source: Gov.uk

We can help you

These changes are a lot to take in, and will increase the complexity of your taxes if you have these various types of income. If you need help unpicking all of this, then please contact us and we will do everything we can to assist you.

HMRC sending letters to self-assessment payers about CGT

Self-assessment taxpayers who have submitted their 2024/25 tax return are now being sent letters by HMRC as they may not have applied the correct rate of Capital Gains Tax (CGT) on disposals after October 30, 2024.

The main rates of CGT on the disposal of assets, other than residential property and carried interest, rose from 10% to 18% for basic rate taxpayers, and 20% to 24% for higher rate taxpayers. But there is a danger they may have not paid the right CGT as the return may not have automatically calculated the CGT liability correctly.

This means they would need to adjust their return, according to the ICAEW. You can check if the amount you paid is correct by using the online calculator at Gov.uk.

What letters are being sent?

There are two letters that HMRC is sending to the taxpayers HMRC feels may have made this mistake. The first letter is for those people who included an adjustment which appeared to be incorrect. The second letter is for those where the return didn’t include the adjustment, and an incorrect rate of CGT has been used.

Depending on which letter is received, HMRC is asking people to use its online tool to check the correct adjustment, and amend the return if it is incorrect. Or if the figure on the return is correct, then people are being asked to let HMRC know that by contacting it using the information in the letter. Either way, action needs to be taken within 30 days of the date of the letter.

If you are paying CGT late, then HMRC will be charging interest on it. The letter will also tell you what to do if you miss the 30-day deadline given in the letter for responding.

Let us help you

If you’re not sure whether you have paid the right amount of CGT via your self-assessment return for 2024/25, then please get in touch with us and we will do what we can to help you.

Stamp Duty thresholds to fall to previous levels from April 1

Anyone buying a property from April 1, 2025, will face higher levels of Stamp Duty Land Tax (SDLT) in England and Northern Ireland as the Stamp Duty thresholds fall back to their previous levels. The current higher threshold of £250,000 before people start to pay SDLT on their home purchase will fall back to the previous level of £125,000 from this date.

First-time buyers will also face much higher fees when they buy a property after April 1, as the threshold where they start paying SDLT will fall from £425,000 to £300,000. It means anyone thinking of buying a new property in the coming months may want to try to complete the purchase before March 31 so they benefit from the lower SDLT charges.

What are the SDLT levels from April 1?

If you’re buying a property up until March 31, then you will pay no SDLT up to £250,000, then 5% on the next £675,000 – so on properties up to £925,000 – then 10% on the next £575,000 up to £1.5m, and 12% on the remaining cost of properties over £1.5m.

After April 1, you will pay no SDLT up to £125,000, then 2% from £125,001 to £250,000, then 5% from £250,001 to £925,000, then 10% from £925,001 to £1.5m, and 12% on any amount over £1.5m. This means that buying a £295,000 property before March 31 would create an SDLT bill of £2,250, but after April 1 this would rise to £4,750.

For first-time buyers, there will be no SDLT to pay up to £425,000 and then 5% on the amount from £425,001 to £625,000 up until March 31. But if you are buying a property worth more than £625,000, you cannot claim this relief and need to follow the SDLT rules for people who have bought a property before.

From April 1, there will be no SDLT to pay on the first £300,000 of a property, with 5% charged on the next £300,001 to £500,000. If the property is worth more than £500,000, you won’t be able to claim this relief and again need to follow the SDLT rules for every other home buyer.

These changes for first-time buyers mean the SDLT bill for a £500,000 property would be £3,750 before March 31, and will rise to £10,000 after April 1 – nearly three times as much.

What if I’m buying a second property?

The amount you pay for a second property is higher than you would pay if you’re buying a main home. These rates apply to a property or part of a property that is being purchased above £40,000, and you may even need to pay this higher level even if you are going to be living in the property as your home.

This can happen when you buy a new home, but have not yet completed the sale on your previous home by the end of the day that you buy the next property. In this instance, you will own two properties at the same time, triggering this higher level of SDLT.

The rates you would face both before March 31 and from April 1 are below:

The higher rates from 31 October 2024 to 31 March 2025

The higher rates from 1 April 2025

Source: Gov.uk

If you have to pay this higher rate because the sale of your home didn’t complete in time, then you should be able to reclaim this amount. If you sell or giveaway your previous main home within three years of buying your new main home, then you can apply for a refund. You can find out more at Gov.uk.

We can help you

If you are struggling to understand what your SDLT liabilities might be then please contact us and we will do everything we can to assist you.

MTD to expand to income tax in 2026 – get ready!

The Making Tax Digital (MTD) regime is set to begin applying to income tax soon, and the first people to be brought into the regime will be the self-employed and landlords. Although April 2026, which is when relevant taxpayers must sign up to file digitally, sounds a long time away, it will arrive sooner than you think, and you need to be ready for the changes to avoid the chance of a penalty.

From April 2026, any self-employed person or landlord earning more than £50,000 a year from their self-employed income or property income, will need to sign up to the scheme and file their tax return digitally. Also, instead of filing once a year like you do now, you will instead be asked to send HMRC quarterly updates through compatible software. There are many different brands of software that would be suitable, so finding the right one for you is something you could start working on now in consultation with your accountant.

Even though the first sign-ups for MTD for income tax will be for those earning more than £50,000 a year, anyone earning income of more than £30,000 will also have to sign up to the regime by April 2027.

What if I earn less than £30,000?

If you earn less than £30,000 you can still sign up for the scheme voluntarily, but you will not be forced to join in these early stages. But there might still be some benefits to signing up early. Currently, HMRC is running a testing phase to find out how to make the expansion of MTD work best for the self-employed and landlords. This means if you sign up early, you may have a chance to help shape the outcome.

It will also help you to get to grips with the new system before you are obliged to use it, so you feel more confident in everything you need to do before the April 2026 or deadlines arrive.

You will also have access to a dedicated customer support team as an early adopter, who will help you understand and resolve any issues you have with filing under the new regime. Plus, you and your accountant would be supported through the process for your other tax affairs – including PAYE and self-assessment for the 2024/25 financial year.

How do I join up?

Around 780,000 people are expected to qualify to join the first phase of this round of MTD. The aim for HMRC is to improve record keeping, as you must file quarterly, and everything will be held digitally which should also reduce the number of errors on your taxes.

If you want to join up in this phase, then please contact your accountant and they can help you. They can sign up as many of their eligible clients as they want to, and this is the best way to access the new regime as you then have the backing and help of an expert to guide you through any problems. But if you want to sign up separately, you can do that providing you’re eligible.

To be eligible, there are various rules and regulations, so you need to check if any of them apply to you. These details are outlined on the Gov.uk website:

You can sign up voluntarily if (all the following):

• your personal details are up to date with HMRC
• you’re a UK resident
• you have a National Insurance number
• you have submitted at least one Self-Assessment tax return
• you’re up to date with your tax records — for example, you have no outstanding tax liabilities
• you use an accounting period that runs from 6 April to 5 April

You can also use an accounting period that runs from 1 April to 31 March, if the software you choose supports this. To use this accounting period, you must:

• select calendar update periods in the software before the first update is made
• make an adjustment at the end of your first tax year — so that your income and expenses from 1 April to 5 April are included in your tax return

If you sign up, during testing you will not be able to:

• claim carry back of losses
• change your accounting period
• change your accounting method

You cannot sign up voluntarily if you:

• have a High-Income Child Benefit Charge
• have a payment plan with HMRC
• are a partner in a partnership
• claim Married Couple’s Allowance
• claim Blind Person’s Allowance
• are currently, or are going to be, bankrupt or insolvent
• are an MP, minister of religion or Lloyd’s underwriter
• have income from being a foster carer or being in a shared lives scheme
• have income from a trust
• have income from a jointly owned property
• have income from a furnished holiday let
• are subject to a compliance enquiry
• use ‘averaging’ or other arrangements because your profits vary between years — for example, because you’re a farmer, writer or artist
• are signing up on behalf of someone else (unless you’re an agent) — this includes (but is not limited to) if you’re:
  • an insolvency practitioner
  • a nominee
  • a solicitor

Source: Gov.uk.

What software will I need to use?

There are many different types of software you can use to file digitally online, and some do not charge you to use them. But it isn’t as easy as just signing up to any software as which will suite you best will depend on what data you need to hold, how simple your tax affairs are, and how tech savvy you are.

All of the compatible software options can be found on Gov.uk, and while there are a few that are currently working, many more are being developed by some of the biggest names in online accounting. Again, you can ask your accountant for guidance on which would work best for you if you are unsure.

The new regime will mean more admin for those joining up, and collectively for everyone who is eligible and is earning more than £30,000, the cost of implementing the new regime is expected to be £561m as a one-off. But filing more regularly and keeping better records online is likely to help you with other areas of your finances too. So, there are additional benefits to signing up early.

Contact us

There are many aspects of the changes to the MTD regime that you may not feel comfortable with, but if you have any queries then please get in touch with us and we would be delighted to help you.

New Labour Government reveals plans in King’s Speech

The landslide victory for Labour has promised a variety of changes to the way the country is run, and a wide range of these were revealed in the King’s Speech for the State Opening of Parliament. There were around 35 bills announced in the speech, including a new Pension Schemes Bill, Planning and Infrastructure Bill, Great British Energy Bill, Renters Rights Bill, National Wealth Fund Bill, and even a Better Buses Bill.

The Prime Minister, Sir Keir Starmer, detailed in an introduction to the King’s Speech how his Government plans to focus on boosting Britain’s economy, including implementing a plan to prevent the kind of chaos that ensued after the damaging mini-Budget delivered by the short-lived Liz Truss Government.

The Prime Minister said: “This King’s Speech sets out a clear destination for our country. Our plan starts, as it must, with our economy. The economic chaos working people have endured since the mini budget will never happen again with my Labour government. We are introducing a Budget Responsibility Bill to protect taxpayers’ money and people’s living standards. From that foundation of economic stability, we will generate higher economic growth in every community.”

He also highlighted how planning rules will be reformed “to build the homes and infrastructure the country desperately needs”, and workers’ rights are also in the frame for change, “so every person has security, respect and dignity at work”.

The move towards cleaner energy is set to get a boost with the creation of a new publicly owned energy company which “will create a new industrial strategy and invest in cleaner, cheaper British energy; and we will harness the power of artificial intelligence as we look to strengthen safety frameworks”.

He also talked about making sure decisions were being made in Government by people who have “skin in the game” which will help local communities directly.

He added: “Democratic decisions are best made by people with skin in the game, so my government will push power out of Westminster and empower local leaders to deliver for their communities. Local growth plans will make sure that every community can seize the opportunities ahead of us and every person can benefit from higher growth.”

What will the Pension Schemes Bill achieve?

One of the major bills revealed was the Pension Schemes Bill. The bill includes measures to automatically consolidate small pension pots into a single pension to reduce operating costs for the members, which in turn will help improve performance. It also outlines ways to ensure all pension savers are getting value for money from their pension provider.

Pension scheme trustees will also be required to offer retirement income products to pension savers when they reach retirement age, which should help people to make the right decision about how they use their money when the time comes. The bill also aims to change the definition of a terminal illness so pension scheme members can get a lump sum payout earlier.

The response to the plans – many of which continue plans outlined by the previous Conservative government – has been largely positive. Paul Leandro, Partner at Barnett Waddingham, said: “We welcome the new Pensions Scheme Bill announced in the King’s Speech today, particularly the increased focus on pension schemes to offer retirement income products or a range of products. Since the full freedoms were introduced in 2015, the retiring and retired populations have been underserved. This is a positive step towards addressing that gap.

“However, the industry shouldn’t just fixate on building new products. Investment is needed into how the options are communicated to people. Retirement products are essentially pointless if people are not informed about them or engaged with them. Supporting people in how to make choices now and on their retirement journey is crucial.”

Mr Leandro also pointed out that the current level of defined contribution (DC) pensions is inadequate, but that the new bill makes no reference to this, or how to encourage people to save more for their future.

He added: “This is disappointing as it’s clear people are not saving enough for retirement, and even with new initiatives around consolidation and value for money, people will still be left with inadequate pension pots unless they save more during their working lives. This is exacerbated by gender and ethnicity gaps, which frustrating do not seem to be covered in the bill and which is a significant concern in the current pension landscape.”

The Renters Rights Bill

People who rent their property in the private rental sector will also see new protections come into force, creating what is being called a ‘level playing field’ in the rental sector. These include abolishing Section 21 – no fault evictions, with clearer eviction grounds being introduced to allow landlords to regain their properties when they need to.

Other measures will help to empower tenants to challenge unfair rent increases, which have been used in the past to effectively force someone from their rented home by pricing them out of it. New laws will also curtail rental bidding wars between agents and landlords.

Tenants will also have the right to request a pet, something that many landlords will currently not allow, and all landlords must consider this request and not unreasonably refuse it. This change will help those people who are renting but want to live with their furry friends, and previously may have struggled to find an accommodating landlord.

Other measures mentioned

There were many other measures mentioned in the King’s Speech, including the Employment Rights Bill, which will ban “exploitative” zero-hours contracts, create a minimum wage which is a genuine living wage, end the practice of fire and rehire, and introduce basic employment rights from the first day of employment. This is all part of the plan to boost people’s security at work.

The setting up of Great British Energy will also move Britain towards being a clean energy “superpower” by 2030, according to the supporting documents to the speech. This should also help to lower energy bills for households for good over time. This entity would be publicly owned and will “boost energy security, create jobs and build supply chains in every corner of the UK”, the Government said.

Contact us

There are many aspects of the King’s Speech that will have an impact on your wallet over time, and we can help you to navigate where you will win and where you will lose. So, if you want to plan for your own or your business finances, then please get in touch with us and we would be delighted to help you.

Why Stamp Duty Land Tax might need to be reformed

Stamp Duty Land Tax (SDLT) is the bane of property buyers in the UK. It is paid on every property purchase worth more than £250,000, and more people are being forced to pay it each year as the thresholds stay the same while property prices rise. The number of transactions under this lowest threshold has fallen to just 25.5% in the first quarter of this year, compared to 62.5% of transactions back in Q1 2014, according to research from Coventry Building Society.

Almost half (47.5%) of property purchases were between £250,000 and £500,000 in Q1 2024 which suffer 5% SDLT, with the average amount paid reaching £9,038 – around £3,000 more than the average 10 years ago. Back in 2014, around 28% of buyers were paying 5%.

Now, one in five (21.3%) first time buyers are paying SDLT, while the number of additional property transactions – such as Buy-to-Let properties – has fallen to 43,800 in Q1 2024. This will ultimately have an impact on the amount of rental property available, which will also push up rents, making it harder for people to find a home.

Non-residents pay an additional 2% SDLT on a purchase in the UK, and if this is a Buy-to-Let or second property, then they will also pay an additional 3% SDLT charge. This additional 3% charge must also be paid by anyone buying rental property, which is also helping to slow down the purchases for these buyers too.

It is for these reasons and more that property experts are suggesting SDLT should be reformed, to help grease the wheels of the property market, which has stagnated somewhat in the last year or so.

Temporary threshold changes aren’t the solution

Jonathan Stinton, Head of Mortgage Relations at Coventry Building Society, said: “The right changes to Stamp Duty could make a huge difference to homebuyers and the wider economy; it could not only put money back in the pocket of purchasers, it could also oil the wheels of the market and make it easier for people to move up and down the ladder throughout their lifetime.

“The go-to solution has been temporarily changing the thresholds, but there’s a risk that they become out of sync with house prices in a few years, and they don’t address other issues like support for downsizers or the significant upfront cost for those investing in rental properties. A considered, longer-term review, and implementing the findings, would have a greater and longer-lasting benefit to buyers and sellers.”

Is there a way to reduce my SDLT legitimately?

There is little you can do to mitigate SDLT, as it is charged on the purchase price of the property once that is agreed. But there are some temporary reliefs in place for certain buyers that are helping to reduce the liability currently.

For first time buyers, the threshold before SDLT is charged sits at £625,000 until March 31, 2025, at which point the Government is expected to repeal the benefit. This extra threshold was not previously open to those first-time buyers who were buying a property through a nominee or bare trust, which is often used by domestic abuse victims who don’t want their former partner to be able to find their address.

However, from March 6 this year, the rules have changed, and now any of these transactions that are completed after this date will be able to benefit from this additional relief. If contracts are exchanged before this date, but complete on or after that date, then transitional rules will apply. Your accountant can give you more details on this.

There has been another change which is in effect from June 1, 2024, when the Multiple Dwellings Relief (MDR) is abolished, meaning anyone in England and Northern Ireland can no longer claim additional relief if they buy more than one property in a single transaction. MDR allowed the buyer to pay SDLT based on the average price of the properties purchased. From June 1, their SDLT bills will be higher.

If contracts were exchanged before March 6, 2024, and do not vary before completion, then the relief will still apply even if the sale is completed after June 1.

We can help you

SDLT has become much more complicated in recent years, so if you need help to make sure you are paying the right amount of SDLT, then please get in touch with us and we will be happy to help you.

Furnished Holiday Lettings tax rules set to change in 2025

The tax regime for Furnished Holiday Lettings (FHLs) is set to be abolished from April 6, 2025, with some key tax breaks being removed by the Chancellor in the Spring Budget on March 6 in a move which could raise as much as £300m extra in tax each year. The changes will make it much harder for individuals providing holiday lets to reclaim some of the key costs associated with their letting business, and could make it more difficult to make these types of lettings profitable.

Around 127,000 properties in the UK were reported as FHLs on the 2019/2020 tax returns, but the measure is designed to encourage those offering their properties for rent as FHLs to instead offer them for long-term rent. These measures could have the desired effect, or it could result in some of those landlords affected deciding to sell up instead as it is expected the regime would bring FHLs in line with the tax treatment of long-term rental properties, but the draft legislation surrounding this change hasn’t yet been announced.

Even so, experts predict the changes could make a big dent in an FHLs current profits. At present, interest on mortgages on FHL properties can be deducted from the rental income for individuals. From April 6, 2025, interest on mortgages for businesses operated by individuals could no longer be deducted if the regime is aligned with longer-term rental property. Instead, a 20% tax credit would be given against the owner’s tax liability, which for higher rate taxpayers will reduce the tax relief for interest to 20%, rather than 40%.

What else will change?

FHLs owned by individuals currently enjoy a lower capital gains tax on their sale as they are classified as trading assets which are subject to business asset disposal relief when they are sold. This means that where the FHL qualifies, with gains up to the lifetime limit of £1m, they would be taxed at 10%.

From April 6, 2025, the business asset disposal relief won’t be available on FHLs owned by individuals, so they will face CGT of 18% of profits in the standard rate band, or 24% for profits in the higher rate band once the property is sold.

Also, under the current regime, FHLs would qualify for CGT rollover relief if a “replacement qualifying asset” is bought with the proceeds of the sale. But this benefit will also be removed from April 6, 2025.

Are there other allowances that will be removed?

Other changes that allow the offset of running costs could also impact the profitability of FHLs. Under the current regime, any expenditure on an FHLs can get tax relief as capital allowances. This will also be removed from April 6, 2025, although there may still be a way of reclaiming the cost of replacing domestic items against profits. Landlords can claim tax relief for replacing broken furniture and other domestic items under the Replacement of Domestic Items Relief, but this doesn’t apply to furnishing a property at the start, only for items that need to be replaced.

Toby Tallon, Tax Partner at professional services and wealth management group Evelyn Partners, said: “For second homeowners who like to make extra money out of their holiday home by putting it on AirBnB while they are not using it, it will simply make this a less lucrative ‘side hustle’. If that is a make-or-break issue for them and they don’t want to be long-term private landlords, then we could see some of these properties being sold.

“Recent changes to other areas of tax have benefitted FHL owners, which may have influenced the Government in its decision to withdraw the benefits. FHLs qualified for capital allowances, so the full expensing change last year increased tax deductions available to owners. During the pandemic, FHLs that paid business rates became eligible for grants targeted at small businesses. The rules to qualify for business rates rather than council tax were tightened in 2023. For those registered for VAT, they were also eligible for the temporary reduced rate of VAT for hospitality businesses.”

None of these changes will apply to FHLs owned through a company structure, so these properties would not be affected. We will have to wait to see the draft legislation until we know exactly what the impact of the changes will be on individuals running FHLs.

We can help you

If you own an FHL and want to find out what your options are before the rules change, then please get in touch with us and we will be happy to help you.

Landlords, what should you be doing now?

Changes to the Capital Gains Tax (CGT) allowances announced in the Autumn Statement mean that from next April, the current £12,300 allowance will fall to £6,000 and then to £3,000 in 2024. This is a major concern for landlords with rental property, as this will make a significant dent in the gains they can make on property before they pay tax.

It could mean that any landlord currently holding a considerable gain on a property may want to think about whether now is a good time for them to sell, especially as property values are expected to stagnate or fall, in the coming months.

Private residence relief

However, there are some ways you can reduce your CGT bill. If you have lived in the property at any point, you can get some relief from CGT under the ‘private residence relief’ rules. You can get relief for the number of years you have lived in the property, plus nine months at the end of the ownership whether you lived in the property then or not.

The example on the Gov.uk website highlights a property with a gain of £120,000 when you sell, which you have owned for 15 years. But for 7.5 years you lived in the whole property, and then rented out your property for the remaining 7.5 years. The Private Residence Relief applies for the 7.5 years you lived there plus the last nine months you owned the property.

This means you get a total of 8.25 years of Private Residence Relief, which amounts to 55% of the time you have owned it. So, you will not pay tax on 55% of the £120,000 gain, but you will on the remaining 45% – which means you will pay CGT on £54,000.

The reduction in CGT allowances could prompt landlords to sell

The more than halving of the CGT allowance from April next year means some landlords may attempt to sell some of their properties before the CGT allowance reduces. It will not be the right decision for everyone, but if a landlord is already considering this, now might be a good time to press the button.

Zaid Patel, director of London-based estate and lettings agents, Highcastle Estates: “With the CGT tax allowance to be halved to £6,000 from April 2023, we may see an increase in landlords selling up and second homeowners listing their properties with the hope of completing before April. Landlords, who own property as part of a limited company, will be further penalised as they’ll pay more tax on dividends.

“This, coupled with the rise in corporation tax, will likely lead to more landlords trying to sell their properties. However, with the rising cost of living, first-time buyers will continue to find it challenging to save for a house, which may mean demand will stifle.

“I expect house prices to drop slightly until late 2024, when there will be a rush of buyers hoping to complete before the stamp duty cuts end. It means estate agents will struggle over the next two years and cutting the dividend tax relief while increasing corporation tax could mean estate agents may start selling their businesses or winding up during this recession.”

Landlords have been hit hard

Landlords have been hit hard by various changes to what they can claim and the way in which they are taxed in recent years, especially if they do not hold the properties within a limited company. For example, if someone is getting rental income of £15,000 a year but having to pay mortgage interest amounting to, say, £8,000 a year, then previously they would be able to offset the entire interest against their rental income before tax. This would mean paying tax on just £7,000 of income.

Now, unless they own their properties within a limited company, they are not able to offset the mortgage interest against their income before tax. So, they would pay tax on the full £15,000 of income. If they were 40% taxpayers and all their allowances had already been used, this would give a tax bill of £6,000 when they are also paying £8,000 in mortgage interest. This would leave just £1,000 for the landlord. Paying 40% on the same basis on the £7,000 of income after accounting for the mortgage interest would give a bill of £2,800 – leaving £4,200 for the landlord.

This is one reason that the number of buy-to-let properties being held within a limited company has reached a record level of 300,000 according to estate agent Hamptons.

We can help you

If you have concerns about your buy-to-let property or you want to find out if you would be better off using a limited company structure, then contact us and we will work with you to help you make any necessary changes.

Mini-Budget wreaks havoc on markets and the pound – but will you benefit?

New chancellor Kwasi Kwarteng delivered his first mini-Budget, officially labelled ‘The Growth Plan 2022’, on September 23, and while it largely consisted of tax giveaways, it was not well received by markets.

The FTSE 100 fell sharply on the day from 7,221 on September 22 to 6,986 on September 23, breaching the psychologically important 7,000 barrier before recovering some ground in the following days. The pound reached a record low against the US dollar briefly on September 26 at US$1.0327, as the biggest programme of tax cuts for 50 years was digested by economists and investors.

The market shocks have prompted the Bank of England to state it would not hesitate to raise rates if needed to help bolster the UK markets, and there are already rumours that the BoE base rate – which is currently 2.25% – could rise as high as 6% next year. Some mortgage lenders have temporarily pulled products from their offering as a result.

What are the tax cuts?

Despite the poor reaction to the mini-Budget, the Chancellor’s tax cuts will mean we all have a little more money in our pockets. The highest rate of tax – the 45% band for those earning more than £150,000 per year – is set to be scrapped completely from April 2023. In addition, the current 20% starting rate of income tax will fall to 19% from April 2023 rather than the previous planned introduction date of April 2024.

There have also been changes to National Insurance, with the 1.25% Health and Social Care Levy which was introduced in July being scrapped from November 6 this year, and the plan for this to come into force as a separate tax from April 2023 is also scrapped. The statement on the reversal of the Health and Social Care Levy stated: “This tax cut reduces over 920,000 businesses’ tax liabilities by £9,600 on average in 2023-24…It means 28 million people across the UK will keep an extra £330 a year on average in 2023-24.”

Stamp Duty Land Tax Changes

Stamp Duty Land Tax – the tax you pay when you buy a property in England and Wales – also changed with immediate effect on September 23, with the threshold at which you start to pay SDLT doubling from £125,000 to £250,000. This means no SDLT is payable on any property worth less than £250,000. The Government stated that this measure should save homebuyers an average of £2,500 in SDLT.

For first-time buyers, the threshold at which SDLT is charged rose from £300,000 to £425,000 on the same day. This now applies to properties worth up to £625,000 rather than the previous £500,000 limit. The Government stated this should save first-time buyers an average of £8,750 in SDLT.

Planned rise in Corporation Tax cancelled

The current rate of Corporation Tax was also due to rise in April 2023 from its current level of 19% to 25% for companies making more than £250,000 in profit. But this move has been cancelled by the Chancellor in his statement.

Companies that were making profits of between £50,000 and £250,000 were also expecting to see an incremental increase in the amount of Corporation Tax they would pay from April next year, but this has also been cancelled. So, all companies will pay 19% Corporation Tax on profits no matter how much profit they make in a single year.

Why have markets reacted so badly to the mini-Budget?

There has been widespread alarm about the changes made and planned for the tax system, as the tax cuts are seen as a way primarily to help the wealthier members of society, while giving less assistance to those who may need it more. For example, top earners will see a 5% reduction in their highest marginal tax rate, while the lower paid will see just a 1% reduction.

The theory behind this is something called ‘Trickle-down economics’ where cutting the tax burden of the highest earners should encourage them to spend more and those further down the economic chain should see the benefit of this as more money goes into their own pockets. But this is a theory that is yet to work in practice.

The other reason for the poor market reaction is because these tax cuts are going to be paid for by increasing Government borrowing. Borrowing more money to fund these cuts – especially when we are in an economic environment where interest rates are rising – is not considered by many to be a good plan.

However, we will have to wait and see what the result of all these changes are to discover whether it will benefit the UK.

Contact us

To find out how you can benefit from the measures announced in The Growth Plan 2022, please get in touch with us and we can give you any assistance and support you need.

Bank of England (BoE) base rate rises to 0.75% – what it means for consumers and businesses

The Bank of England (BoE) base rate rose to 0.75% in March in response to Consumer Prices Index (CPI) inflation rising to 5.5% – almost triple the BoE’s target of 2%. Inflation is set to continue rising throughout the year (see Spring Statement round-up) with the Russian invasion of Ukraine creating increased pressure on already rising prices.

What does it mean for you?

Any rise in the base rate has an impact on borrowing rates for businesses and individuals, and on savings rates. Each is likely to rise – great news for savers, not such great news for borrowers.

How will borrowers be affected?

Any loan you have that does not have a fixed rate – such as some mortgages, personal loans or credit card debt, for example – could face a rise in interest rates if the company providing this chooses to pass this rate on. And many will.

However, if you have a fixed-rate mortgage, unsecured personal loan or other loan, for example, then you will not see these rates change until you reach the end of the offer term or until the loan is paid off.

How are savers affected?

If you have savings in a fixed-rate account, these will not rise either. But if your savings are in a non-fixed interest rate account, then you could see the interest you are paid on this rise.

If you see a better rate than you are being paid elsewhere, then it is worth considering moving your savings to the better-paying account. But bear in mind if you are in a fixed-rate account, you could face a penalty for doing this which could negate the benefit of moving. So, check with an expert before taking any action.

Safety net

You also need to consider how much of your money is in each institution. The Financial Services Compensation Scheme (FSCS) covers your money on deposit with a single institution up to £85,000. But you need to be aware that various brands come under one institution – such as Halifax and TSB coming under the Lloyds Banking Group.

You would be covered up to £85,000 across all these accounts, not in each. It only becomes relevant if one of the banks goes bust, but we know from experience that however unlikely, this can happen. So, it is something to bear in mind.

Find out how we can help you

If you are unsure about whether your money is working as hard for you as it could, then please feel free to get in touch and we will help you in any way we can.

Stamp Duty Land Tax – why this will increase as house prices rise and what you can do to reduce it

Stamp Duty Land Tax (SDLT) receipts were somewhat skewed in the last year as the SDLT holiday for properties worth up to £500,000 was phased out on June 30, 2021, and the holiday for properties worth between £125,000 and £250,000 ended on September 30.

These two deadlines resulted in a flurry of activity as people tried to complete purchases under the wire and avoid having to pay SDLT on their purchases. The result, according to Government data, was that transactions in October to December last year were 10% lower than the previous quarter, and 13% lower than Q4 2020.

Total receipts up in Q4 2021

However, despite this, total receipts in Q4 2021 were 22% higher than Q3 2021, and 55% higher than Q4 2020. This change in receipts will have largely been impacted by the lower residential nil-rate band of £125,000 for Q4 last year compared to £250,000 for Q3 2021 and £500,000 for Q4 2020.

House prices continue to rise, and while the thresholds stay the same, the receipts are likely to increase if property sales continue at the same pace.

2% SDLT surcharge for non-residents

One additional consideration is the application of additional taxes on properties bought by people who are non-resident in the UK. These purchases have faced a 2% SDLT surcharge since April last year. To the end of Q4 last year, this had resulted in 8,500 transactions paying £86m.

Possible ways to reduce SDLT

There are a few things you can do to mitigate your SDLT, including buying a property in a lower price bracket or negotiating a different price with the seller that brings you below a threshold. But beware, HMRC would be likely to take a dim view of any price cuts that mean you are buying a property for what would not be considered the full market value.

If you bought a second home and paid the additional 3% SDLT as a result, then if you sell your main residence within three years of completing on the second property, you may be able to reclaim a refund of the 3% surcharge amount. This could be a substantial sum and is worth considering if you plan to sell your main home soon after buying a second home.

You can also negotiate a price for removable fixtures and fittings that the seller is prepared to leave behind, as you only pay SDLT on the property purchase itself. This could reduce the price to drop you into a lower tax band, but HMRC insists this is done on a “just and reasonable basis” so you would need to make sure you get legal advice on how to do this properly.

First-time buyers also currently do not pay SDLT on properties worth up to £300,000 so providing you buy a property below this level, you will not pay SDLT.

You can also build your own property if that is something that appeals to you. You would pay the SDLT purely on the cost of the land purchased, which is likely to be considerably lower than buying a property already on the land. Extreme, yes, but an option for the right person.

Find out how we can help you

If you have a query about SDLT and how you can deal with tax, then please give us a call and we can guide you through what you can and cannot do to mitigate this tax.

Businesses must prepare as wider creditor action protections end in March

Companies with debts outside of their rental arrears face the removal of protection against creditor actions from March 31, 2022.

Other debts outside rental arrears affected

Currently, rent arrears built up because of forced closures as a result of COVID-19 are excluded from these measures, as they are covered by other legislation

Any debts outside of rent arrears, must reach a £10,000 threshold before a winding-up petition can be filed. Before the filing, the creditor must have given the debtor a notice – called a Schedule 10 Notice – which states that if a proposal for payment of the debt has not been made within 21 days of the notice, then the creditor intends to file a winding-up petition.

Firms must prepare to deal with possible litigation from April 2022

However, these restrictions end on March 31, so any business with debts of more than £10,000 that are not related to rent arrears needs to be sure it is prepared for these protections to be removed, unless more legislation is passed before that date.

Challenges could be made for as little as £750 owed

Law firm Freshfields Bruckhaus Deringer highlighted that the Government has not changed the threshold to serve a statutory demand for winding-up from £750. So, while the current legislation is in place there are two thresholds in place for the compulsory winding-up process. But once Schedule 10 notices are repealed, the lower level of £750 remains.

Find out how we can help you

If you have debts outside of rental arrears that have built up due to difficult trading conditions during the pandemic, or because of forced closures, then please contact us to find out how we can help you manage this most effectively for your business.

Landlords and tenants face legally binding arbitration over rent arrear disputes

Companies forced to close due to Coronavirus restrictions are currently protected from eviction by landlords until March 25, but a Government Bill currently before Parliament is expected to create binding arbitration following this date.

Code of Practice

The Commercial Rent (Coronavirus) Bill, which was originally announced alongside a Code of Practice by Kwasi Kwarteng on November 9, 2021 protects commercial tenants in arrears from being evicted. The aim is to encourage landlords and tenants to negotiate how to deal with these arrears and to share the cost of commercial rent debts caused as a result of closures during the pandemic.

The Code of Practice outlines the process for tenants and landlords to settle outstanding debts. But any ongoing disputes after March 25 could be settled by binding arbitration if the Bill successfully passes through Parliament.

Debts built up by the likes of pubs, gyms and restaurants as a result of their forced closure during the pandemic will be within the scope of the legislation. Any debts built up outside of these times will be excluded, as will debts resulting from the voluntary closure of a business where it would not have been forced to close under the emergency measures.

Protection from legal action will end

Since November 10, 2021, the existing legislation has protected commercial tenants from County Court Judgements, High Court Judgements and bankruptcy petitions issued against them because of rent arrears accruing during the pandemic.

However, if no agreement can be reached, then either the tenant or landlord can apply for arbitration unilaterally. The arbitration can be applied for within six months of the legislation coming into force with the tenant expected to repay the final agreed amount within 24 months.

Business Secretary Kwasi Kwarteng said at the launch: “We encourage landlords and tenants to keep working together to reach their own agreements ahead of the new laws coming into place, and we expect tenants capable of paying rent to do so.”

Support for the moves, but ‘devil is in the detail’

Kate Nicholls OBE, CEO of UK Hospitality, said: “It is in the long-term interests of landlords and tenants to come together and find solutions that ensure business survival and that do not undermine the economic recovery.

“We share government’s view that arbitration should be a last resort and this process must take into account the exceptional and existential level of pain that hospitality businesses have faced over the last 18 months. It must not impact this industry’s ability to rapidly recover and create jobs throughout the country.”

However, while Helen Dickinson OBE, Chief Executive of the British Retail Consortium, supports the principle of compulsory arbitration, she said the “devil will be in the detail on issues around what tenant viability really means in practice and the power of arbitrators”.

She added: “We will engage closely and constructively with government to help ensure their proposals protect otherwise viable businesses, secure the recovery, and protect jobs.”

We can support you if you have rental arrears

If you have rental arrears due to forced closures during the pandemic, then please get in touch so we can help support you through this difficult time.

New lower temporary SDLT threshold

The residential stamp duty land tax (SDLT) threshold applying in England and Northern Ireland was temporarily increased to £500,000 from 8 July 2020 to 30 June 2021 (extended from the original end date of 31 March 2021). From 1 July 2021 to 30 September 2021, a new temporary residential threshold of £250,000 applies. The threshold reverts to its usual level of £125,000 from 1 October 2021. Details of the rates can be found on the Gov.uk website.

Nature of the temporary threshold

To help boost house sales during the COVID-19 pandemic, the SDLT residential threshold was temporarily increased. Similar measures were introduced in Scotland in relation to land transaction tax (LTT) and in Wales in relation to land and buildings transaction tax (LBTT).

SDLT: 8 July 2020 to 30 June 2021

A higher temporary residential SDLT threshold of £500,000 applied in England and Northern Ireland where completion took place between 8 July 2020 and 30 June 2021. The usual rates applied to any consideration in excess of £500,000.

SDLT: 1 July 2021 to 30 September 2021

From 1 July 2021, the SDLT residential threshold drops to a new temporary level of £250,000. If you are in the process of buying a house and missed the 30 June 2021 completion deadline, you will be able to save SDLT of up to £2,500 if you complete by 30 September 2021.

The residential rates applying during this period are as set out in the table below.

First-time buyers

From 1 July 2021, the threshold for first-time buyers reverts to £300,000 where the consideration is £500,000. First-time buyers pay no SDLT on the first £300,000 and pay SDLT at the rate of 5% on any consideration in excess of £300,000 up to £500,000. If the consideration is more than £500,000, the above rates and residential threshold apply.

SDLT: From 1 October 2021

The residential SDLT threshold reverts to its usual level of £125,000 from 1 October 2021. Purchasers will pay SDLT at a rate of 2% on the portion from £125,000 to £250,000. Above £250,000, the rates are as in the table above.

Second and subsequent properties

Investors and second-home owners also benefit from the temporary residential thresholds as the 3% supplement is added to the residential rates as reduced.

Scotland

The LTT threshold in Scotland was increased to £250,000 from 15 July 2020 until 31 March 2021. However, this period was not extended, and the threshold reverted to £145,000 from 1 April 2021. As in England and Northern Ireland, those buying second and subsequent properties benefited from the higher threshold; the 4% supplement was applied to the reduced residential rates.

Wales

The LBTT threshold in Wales was increased to £250,000 from 27 July 2020 to 30 June 2021, reverting to £180,000 from 1 July 2021. Unlike the rest of the UK, purchasers of second and subsequent properties in Wales did not benefit from the higher threshold.

Speak to us

If you are thinking of moving home or buying a holiday or investment property, speak to us to find out whether you can save SDLT.

Higher residential SDLT threshold extended

Stamp duty land tax (SDLT) is payable when you buy a property in England or Northern Ireland. Last year, the SDLT residential threshold was temporarily increased to £500,000 with effect from 8 July 2020. The threshold was due to revert to its normal level of £125,000 from 1 April 2021, but this has now been delayed.

The residential threshold applying in Scotland for Land and Buildings Transaction Tax (LBTT) was also increased for a temporary period, but reverted to its normal level of £145,000 from 1 April 2021. In Wales, the residential Land Transaction Tax (LTT) threshold was increased to £250,000 from 27 July 2020. It will remain at this level until 30 June 2021, reverting to its usual level of £180,000 from 1 July 2021.

SDLT residential threshold – 8 July 2020 to 30 June 2021

The SDLT residential threshold will remain at £500,000 until 30 June 2021. The rates applying until that date are set out below.

SDLT residential threshold – 1 July 2020 to 30 September 2021

From 1 July 2021 until 30 September 2021, a lower temporary residential SDLT threshold of £250,000 will apply. The first-time buyer threshold (which applies where the consideration does not exceed £500,000) reverts to £300,000 from 1 July 2021.

The SDLT rates applying for this period are set out below.

SDLT residential threshold from 1 October 2021

The SDLT residential threshold returns to £125,000 from 1 October 2021. The residential rates applying from that date are set out below.

Contact us

If you are looking to buy a property this year, speak to us to find out what you can save by completing the sale by 30 June 2021 or, if this is not possible, by 30 September 2021. Remember, if you are looking to buy an investment property, you will also benefit from the higher thresholds as the 3% supplement is added to the residential rates, as reduced.

Furnished holiday lettings and lockdowns

The second National Lockdown and local restrictions may mean that you are unable to meet the tests for your holiday let to qualify as a furnished holiday letting (FHL) for 2020/21. However, where this is the case, all is not lost as there are alternative routes by which your let might meet the FHL requirements.

FHL tests

To qualify for the more advantageous FHL tax regime, your property must be let commercially, let furnished, and it must be in the UK or the EEA. It must also meet all of the following occupancy conditions.

1. The pattern of occupancy condition – the total of all lettings that exceed 31 continuous days in the tax year cannot be more than 155 days.
2. The availability condition – your property must be available for letting as furnished accommodation for at least 210 days in the tax year. Days that you stay in the property do not count.
3. The letting condition – your property must be let commercially as furnished holiday accommodation for at least 105 days in the tax year (excluding lets of more than 31 days and days occupied cheaply or free by family and friends).

If you have failed to meet the letting condition in 2020/21 due to the impact of the COVID-19 pandemic, you may be able to make an averaging and/or a period of grace election to help you reach the magic number. HMRC Helpsheet HS253 contains further details.

Averaging election

If you have more than one property that you let out as furnished holiday accommodation, you may be able to use an averaging election to help all your properties to qualify. This will be the case if some but not all of the lets meet the letting condition. An averaging election allows the condition to be met by reference to the average occupancy across all your holiday lets. For example, if you have three holiday lets and the total number of days in the tax year on which the properties are let as furnished holiday accommodation is at least 315 days, all 3 properties will meet the requirement. The average let will be at least 105 days.

An averaging election for 2020/21 must be made by 31 January 2023.

Period of grace election

A period of grace election can be made as well as, or instead of, an averaging election. It will help if you genuinely intended to meet the letting conditions, but were unable to do so, for example, because of the impact of the COVID-19 pandemic.

To qualify, the property must have met the letting requirement for the year before the year for which you first wish to make a period of grace election; so, if the first year for which an election is required is 2020/21, the letting condition must have been met (individually or as a result of an averaging election) in 2019/20. A second election can be made for 2021/22 if the condition is not met again in that year. However, your property must meet the requirement in 2022/23 if it is to continue to qualify as a FHL.

As with an averaging election, a period of grace election for 2020/21 must be made by 31 January 2023.

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Contact us to discuss how you can ensure that your holiday let qualifies for the favourable FHL tax regime.