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Proposal to Simplify Taxes for Small BTL Investors

August 22, 2016 | Landlord News  

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Doing one’s taxes often falls somewhere between an annoying inconvenience and an absolute nightmare, but for the UK’s massive block of part-time landlords, it is possible that in the future the process will tilt more towards the former. HMRC has launched a 12-week consultation to mull over a proposal that would simplify their taxes.

The proposal states that buy-to-let landlords with an annual business income below £10,000 should not have to keep digital business records or provide quarterly updates to HMRC, while retaining the option to calculate tax using the cash basis (which is only available to sole traders and partnerships).

proposaltosimplifytaxesforsmallbtlinvestors

Under the cash basis, landlords would only have to declare income actually received, whereas those using digital quarterly accounting are required to declare the income they expect to receive, even if no rent has actually been paid.

This system will likely be introduced in the Finance Bill 2017, and implemented in 2018 or later.

According to research conducted by BDRC and the London School of Economics, the majority of landlords in the UK rent out just one property and manage their portfolio as private individuals. However, there is a trend towards larger portfolios, with the proportion of one-property landlords falling from 78% to 63% since 2010.

Indicative of the rise in tenant demand, the proportion of landlords receiving no rent, typically due to lack of occupation, fell in the last six years from 21% to 5%.

Asked how the changing tax environment would impact their business over the next decade, 16% agreed that government policy or tax changes would factor in to their considerations when determining whether to grow their portfolios.

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