The Office of Tax Simplification (OTS) is asking for views about how the taxation of property income could be simplified and has launched an online survey on a number of related topics. This is for long term rentals, holiday lets and the rent a room scheme and covers a range of questions including how easy or otherwise it is to navigate the current HMRC guidance on property tax.
The primary focus of the review is to identify opportunities for simplification of the tax and administrative treatment of individuals, partnerships or companies deriving income from residential property.
The OTS is the independent adviser to government on simplifying the UK tax system and aims to improve the experience for all those who interact with the system, both taxpayers and HMRC. The OTS makes recommendations for the government to consider but it does not implement changes.
On this consultation, the OTS wants to hear directly from individual landlords and small businesses as well as professional advisers, agents and representative bodies about which aspects of property income taxation are particularly complex and hard to get right and to hear any suggestions for improvements.
The OTS will also be meeting with a wide range of stakeholders to discuss the review and have invited interested parties to make contact with them. I will be able to report back on formal input into this consultation, through my involvement with Propertymark and they very much take the view that landlords play a key role in maintaining a strong and thriving private rented sector, and the Government needs to do more to support them – including through the taxation system – in the supply of much-needed rental properties.
The call for evidence outlined that income from residential property owned by individual landlords is taxed under different regimes. With the general position that income tax will be due on the profits from renting out the property, after certain allowable deductions. However, residential property mortgage interest relief is restricted to the basic rate of income tax, and there are no specific capital gains reliefs.
There are also questions specific to letting agents, for example around potential ways we can look to further ease tax administrative burdens on landlords and whether letting agents could provide data direct to HMRC. The survey is open until 5 June 2022 and if anybody would like to submit a response, it can be found at www.smartsurvey.co.uk/s/0WQWWF/
Industry bodies will carry on lobbying the government on tax in the private rented sector, as the last thing the sector needs is greater taxation or added complexity, resulting in landlords selling up or investors discouraged from the buy to let market as the impact to housing would be significant.
As always, I will keep you up to date with any developments, but if you have any questions on these issues or anything else you need advice on in the local property market, please call me as I am always happy to help.