Taxes for UK landlords: The complete guide for 2019/20
Property taxes can be a complicated business, especially for new landlords. In the flurry of activity around getting your property ready to rent, choosing a tenant and planning what you’ll do with your anticipated new income, it’s all too easy to forget about tax.
Getting on top of capital gains tax, stamp duty, corporation tax, expenses and all the other things landlords have to think about can be a minefield. That’s where this guide comes in. As much as is humanly possible, we’ll tell you what you need to know and do about the taxes you’ll pay as a landlord, how to ensure you’re paying your fair share, clarify key terms, and give you the most up-to-date info about all things tax for 2019/20.
We can’t guarantee edge-of-your-seat thrills and spills, it’s tax after all, but we will touch on the most crucial things you need to know for the coming year and beyond. In this guide we’ll address:
- What taxes do landlords pay?
- Tax effective property ownership
- Property expenses – what you can and can’t claim
- Extra tax savings for married couples
Bear in mind, this guide is meant as a general overview of the current tax landscape. For further, more in depth personal tax advice tailored to your specific requirements and circumstances, make sure you seek professional advice from a tax specialist.
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1. What taxes do landlords pay?
Let’s begin by looking at what property taxes exist, and when they have to be paid.
There are three key moments to think about in the property tax lifecycle.
You pay tax when you buy a property, every year you let the property, and later when you sell it.
When you buy property - stamp duty
If you buy a property over a certain price in the UK, you are eligible to pay tax. The exact tax you pay and the specific value of the property that triggers it, will be different depending on your location and circumstances; and you should always seek professional advice for personal tax related queries
In England and Northern Ireland, individuals pay Stamp Duty Land Tax (SDLT) on residential properties worth £125,000 or more, and on non-residential properties or land worth £150,000 or more. You must send an SDLT return to HMRC and pay your SDLT within 30 days of completing the purchase. Your solicitor, agent or conveyancer, if you have one, can do this on your behalf, or you can file a return and pay the tax yourself.
Property buyers in Scotland pay Land and Buildings Transaction Tax (LBTT) on residential properties worth more than £145,000, and on non-residential properties worth more than £150,000. Scotland also has an Additional Dwelling Supplement, payable on properties worth more than £40,000.
You pay this if you already own a residential property and buy another. All LBTT is paid to Revenue Scotland through an online portal.
Property buyers in Wales pay Land Transaction Tax (LTT) on residential properties worth more than £180,000, and on non-residential properties worth more than £150,000. As in Scotland, there are additional charges for residential properties worth more than £40,000 if you already own a residential property and are buying another. You must send an LTT return to the Welsh Revenue Authority and pay your LTT within 30 days of completing the purchase. Your solicitor, agent or conveyancer can do this on your behalf, or you can file a return and pay the tax yourself.
These are only the basic rules. If you’re buying for the first time, the thresholds for paying stamp duty are generally higher, so you may not have to pay. If you’re buying-to-let, stamp duty rates are tiered and start at a lower value than those for other home buyers. In England, the rates look like this: