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The tax year runs from 6th April to 5th April every year, but what does this mean for landlords and is there anything you need to be aware of when this near tax year starts?
Quite a few other countries make their tax yeas align with the usual start and end of a year, so they run from 1st January to 31st December. In the UK though it’s slightly different. Clearly the April dates are rooted in history and in the most basic of nutshells it comes down to discrepancies between the Julian and Gregorian calendars. We aren’t here to get into all that though, we’re here to look at anything landlords should know or need to do as a new tax year starts.
Understand any Tax Changes for the Next Year
Perhaps the most obvious thing every landlord should do as we move into a new tax year is figure out if there have been any significant changes to taxation. Many measures will usually be announced in the budget prior to the new tax year starting, but there are also some un-announced changes you will need to seek out.
The 2021 March Budget
The March budget in 2021 was really the time to get a good grip of the new finance and tax measures being put in place by the government for the 2021/22 tax year and beyond. Not all tax changes are announced though. For instance, the personal allowance and the tax bands for income tax are usually updated every year, but they never make the headlines.
This year there was plenty in the budget to take notice of, most notably:
- Tiered increases to corporation tax (affecting incorporated landlords) between now and 2023.
- Freezes to the personal allowance, reducing the amount of income you can earn tax free over the next few years.
- The extension of the Stamp Duty holiday reducing the amount of SDLT payable on the purchase of a property
Changing Tax Bands and Personal Allowances
In the budget we were informed that the corporation tax rate would be increasing, and that personal allowance would be frozen, but the tax bands also changed significantly. These determine which tax band you fall into and how much tax you pay on your income.
In England, Wales and Northern Ireland the 40% tax band decreased making it so that many more people will fall into this bracket.
In Scotland the tax bands are slightly different.
Personal Pensions
While there is no limit to the amount you can save in a pension, there is an annual and a lifetime limit to the amount of tax-relieved pension savings you can have. The annual lifetime allowance used to be linked to the Consumer Price Index, but this link is being removed over the next few tax years. Before we head into a new tax year you should check your pension contributions. Make sure you understand how much you can save in your pension and take steps to maximise your contributions for the next tax year.
Get Tax Savvy
What better time to start reducing your tax burden than the start of the tax year? Forget new years’ resolutions, make a new tax year resolution to begin paying less tax. In this endeavour, knowledge is power, and there are plenty of resources out there to help. Start by reading the free articles on Tax Insider and Property Tax Portal to help you learn about different tax mechanisms that will save you money. From there you can read more in-depth books and join forum discussions etc. There is plenty to learn from how to use companies to reduce taxes to how to make the most of principle private residence relief to using partnerships to your advantage. The best time to start learning about tax and reducing your taxes was yesterday the second-best time is now.
Start as You Mean to go on
Each year landlords need to file a tax return to report their profit and pay their tax liability. Most landlords use a software solution to keep on top of their finances, but some still rely on spreadsheets. New landlords however might not yet have a system or a preferred method of working. If you want to move from one system to another the beginning of the tax year is the time to do it. If you don’t have a system a new tax year is a great time to start – your next tax return will be easier.
Landlord Vision is a perfect example of this. Many landlords prefer to start using Landlord Vision at the start of the new tax year as it means they can draw a line under their old system and start entering data from the start of the new tax year instead of transferring old financial data over.
Hire an Accountant
If you’ve been thinking of hiring an accountant, maybe your portfolio is growing or you just need a helping hand with your finances, the start of a tax year is a great time to do it. A new accountant needs to get up and running with your current income and expenditure for the year, start from a new tax year and there’s less to bring them up to speed on. Accountants are a great way to stay on top of everything, especially if you don’t have time. If you want to get started with an accountant or bookkeeper, check out our recommended bookkeeper programme.
So that’s everything you should do as a landlord to get ready for a new tax year. Did we miss anything off this list? Let us know over on Twitter or Facebook.
