There are a number of new buy-to-let tax changes landlords should be aware of in 2023.

From income tax rates and capital gains tax, to corporation tax and Making Tax Digital, here’s a run-down of what to watch out for this year or you can call Accountant Services on 0118 207 7207.

New tax rules for buy-to-let landlords

Here’s an overview of all the tax rules and changes landlords need to be aware of in 2023:

• Buy-to-let income tax rates 2023
• Capital gains tax allowances reduced
• Corporation tax rate rise
• Making Tax Digital delayed
• Stamp duty discount
• Buy-to-let income tax rates 2023

So, what exactly are the individual income tax rates and bands for 2023-24? Your personal allowance is the amount you can earn before you start paying income tax.

Currently this is £12,570, and it’s been frozen until 2028.

For the 2023-24 tax year, landlords will pay 20 per cent tax on buy-to-let income between £12,571 and £50,270.

The higher rate threshold for rental income is £50,271, which is the point at which you start paying 40 per cent tax on your profits.

The additional rate (45 per cent) threshold has been reduced from £150,000 to £125,001 and above.

Capital gains tax allowances reduced

From April 2023, the capital gains tax (CGT) allowance has been more than halved from £12,300 to £6,000.

And from April 2024, it will be halved again from £6,000 to £3,000.

This means that when landlords sell their properties, their capital gains tax bill will be higher.

According to research by Accountant Services:

the average landlord will pay £1,770 more in CGT when selling a property in 2023

the average landlord will pay £2,610 more in CGT when selling a property in 2024

It predicts that the average landlord’s CGT bill will rise to more than £23,000 in 2023 and around £24,000 by 2024.

Corporation tax rate rise

Since buy-to-let mortgage interest tax relief was reduced to the basic rate of income tax, a high number of landlords have transferred ownership of their buy-to-let portfolios to a limited company.

This means that they have to pay corporation tax instead of completing a Self-Assessment.

From April 2023, the corporation tax rate for companies with profits above £250,000 increased from 19 per cent to 25 per cent.

Landlords with a limited company portfolio that generates profits of between £50,001 and £250,000 will pay corporation tax at 25 per cent, reduced by a marginal relief. This means they’ll pay a gradually higher tax rate based on how much they earn.

Landlords who make annual profits of up to £50,000 will continue to pay corporation tax at 19 per cent.

Making Tax Digital delayed

Making Tax Digital (MTD), the government’s initiative to make all tax returns digital, has faced a number of delays in recent years.

It was originally due to be introduced for all Self-Assessment taxpayers in 2023, but is now set for 2026 following two separate delays.

As a result, landlords who earn more than £50,000 a year will have to submit their tax returns using Making Tax Digital compatible software from 6 April 2026.

Landlords who earn between £30,000 and £50,000 will need to start submitting via MTD from 6 April 2027.

And for those earning under £30,000 a year, it’s still not clear when you’ll need to submit tax returns using MTD software.

Making Tax Digital has been in place for all VAT-registered businesses since 2022.

Landlords can still benefit from stamp duty cut

In September 2022’s mini-Budget, a stamp duty cut was announced. The threshold for property buyers was increased from £125,000 to £250,000.

Before the cut, landlords and property investors had to pay a stamp duty rate of three per cent on properties bought for up to £125,000 and five per cent on properties between £125,001 and £250,000.

Thanks to the stamp duty cut, they’ll pay a flat rate of three per cent on all purchases up to £250,000 allowing them to make some savings.

Stamp duty rates are set to return to normal from March 2025, meaning landlords buying cheaper properties will no longer benefit from a discount.

Accountant Services is one of the accountancy providers in the UK; we offer a great range of property tax advice specifically for landlords or those with second properties. Call Accountant Services on 0118 2077207.