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HMRC - record tax relief claimed by landlords despite increased restrictions

Buy to let landlords claimed a record £18.5 in tax relief in the year to April 2021, the most recent data available.

This was up from £18.1 billion the year before according to lettings agency ludlowthompson.

The amount claimed increased despite a reduction in the amount of relief that landlords can claim on the interest that they pay on mortgages.

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Loan interest still made up the largest proportion of tax relief claimed by landlords at £6.9 billion, some 37 per cent of all tax reliefs claimed by landlords. Property repairs, maintenance and renewal made up the second largest area where landlords claimed back costs from the tax man, at £4.5 billion, 24 per cent of the overall figure.

With the current tax year ending, ludlowthompson says landlords should make sure they are making full use of all available tax reliefs to prepare for upcoming changes to Energy Performance Certificates. 

All rental properties will have to achieve an energy efficiency rating of grade C or above, a jump of two grades from the current minimum of grade E. The required energy efficiency improvements are expected to apply to new tenancies from 2025 and to all tenancies from 2028.

ludlowthompson adds that care must be taken to ensure that improvements related to energy efficiency do not count as capital improvements, which would not be eligible for tax relief. However, improvements such as installing double glazing and mew boilers would be allowable under repairs, maintenance and renewals.

Agency chairman Stephen Ludlow says: “There are currently no specific reliefs available to help landlords improve the energy efficiency of their properties in time for the deadline. Landlords may be able to make careful use of the repairs, maintenance and renewal allowance to replace fixtures such as boilers with more energy-efficient models.”

“There is a strong argument that the Government should provide more generous tax benefits for property improvements. This would incentivise landlords to make upgrades which would improve the overall quality of UK housing stock.”

Ludlow adds that landlords benefitting from an increase in rents may wish to use the additional income to make their properties more energy efficient.

“Despite changes to tax reliefs, buy-to-let landlords claimed back an increased amount from the taxman in the last year. Within an inflationary environment, buy-to-let remains an attractive investment because landlords have the opportunity to increase rents in line with wage growth.”

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    Another non story. Tax reliefs claimed have gone up by 2% when inflation is around 8% so is in fact a drop in real terms.

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    Tax reliefs claimed gone by LL’s despite restrictions. What’s a surprise about this when we are required to do loads of extra requirements to comply that are all hugely expensive to achieve, then complain about high rent.

  •  G romit

    Mortgage interest is a legitimate business expense just as every other business that borrows money claims as an expense.
    It's not as implied in this article some kind of handout from the State at taxpayers expense.

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    Record level of investment and expenditure by landlords in providing homes for others.

    A more accurate headline but why would HMRC ( or anyone) want to put a positive spin on anything involving landlords? Perhaps because we have a positive effect on the lives of tenants?

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    What absolute rot to call legitimate business expenses tax relief and have some quarters spin it as ‘ripping off the taxpayer’. So, so predictable. And of course nobody points out the massively high rate of income tax/sdlt/cgt paid by landlords, nor the VAT collected by govt on the expenses paid out! As for these figures, they are way too LOW in a fair and legitimate tax environment. They should be allowing full mortgage interest deductions as a true and legitimate tax deduction in the same way every other business can. Ridiculous and misleading nonsense as always. Somebody really ought to properly explain these statements rather than spinning them as landlords gaining something from the taxpayer.

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    The biggest bug that I have is that as a residential LL I am not able to claim the VAT on expenses.
    In fact as a LL we lose out for tax purposes, as a basic rate taxpayer 20% all we get is relieve of only £24 on £120 VATable expense. If LL's were treated like a business for VAT purposes I could claim the VAT of £20 and a further £20 on the remaining £100 as a basic rate taxpayer.
    HMRC treats rental properties as a passive investment ie we just sit back and let the rent flow into our bank account without doing any work.Residential LL are not treated for tax purposes as a business, hence no CGT exemption ie roll over/ asset disposal relief, no deduction of pensions contribution and no IHT reliefs on death.

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    Trust me you don't want to be VAT registered, I was for 30 yrs in the motor trade, a right pain and a lot of extra work evenings and weekends, also we would have to charge our tenants VAT on their rent. I agree with you on the CGT we should be able to reduce it by inflation, which at one point we could, and we should also be able to roll it over into new investments. IHT doesn't bother me too much as neither myself or my wife will be paying it, our children will on their free money and assets though

     
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    I totally agree with Andrew and dread the possibility of some wily politician deciding to apply the same VAT rules to Landlords as apply to plumbers, electricians etc.

    Your tenants would have to pay an extra 20% rent for your gross rental income to remain unaffected. Any lower increase will mean the proportion of the rent you keep will be less than if you weren't VAT registered. Only the taxman would win.

     
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    Mario Mario, start it set it up on-line £50. Per Landlord Registration (=£1 pw) for Landlords to be represented and lobby Parliament, it doesn’t matter about offering other services the main goal has to be Policy fairness and Represented at the highest level and not having every time pot Organisation calling all the shots making unjust laws for us, if they won’t pay that they are not LL’s

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    What were the total rental receipts for the year ended 05/04/2021 compared with the previous year ?
    Perhaps the total percentage relief was reduced .
    Also was the EPC C rating requirement , beginning on 01/01/2025 for new tenancies and 01/01/2028 for existing tenancies , postponed by a year as was speculated ?
    Why are houses owned by social landlords excluded from the upgrading requirement ?

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    Thy guy writing the article has written more books than the amount of properties he owns. How about getting someone in who has a clue.

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    Andrew your right VAT returns are a pain, but the VAT rules can be changed so that residential rental income is subject to zero rate (so we can claim the VAT) and not exempt (we can't claim the VAT). IHT does not bother you, as you do not have to pay it but your estate does and after all your hard work in building a rental business your children will only get 60% of your estate, whereas if you have a trading business they will get 100% of the assets.

    Why hasn't any bodies ie NRLA etc lobbied for rental business to be treated as a Trading business, as LL do actually work for their rental income.

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