Capital gains tax allowance
The start of the tax year means you have access to a new capital gains tax allowance.
While this will not impact you if the only property you plan to sell is your main home, it can have big implications if you are selling a buy-to-let property or second home.
Capital gains tax is paid at a rate of 18% for basic rate taxpayers and 28% for higher rate ones on any increase in the value of a property that is not your main home since you bought it.
The good news is that you have a capital gains allowance of £12,300 in the 2021/22 tax year, meaning the first £12,300 of any gains made are tax-free.
If you jointly own the property with your partner, you can pool your allowances to give a total of £24,600.
Property income allowance
You are allowed to receive £1,000 in income from a property tax-free each tax year, so as of 6 April, you have a fresh allowance.
While the sum may not sound like much, it is aimed at people who make a small income from their property each year, such as through renting out a room in their home on websites like Airbnb.
If your total annual income from property is £1,000 or less, you do not have to tell HM Revenue & Customs (HMRC) about it or declare it on a tax return.
If you own the property with your partner, you can pool the allowance, meaning the first £2,000 you earn will be tax-free.
Rent a Room scheme
If you make money through renting out furnished accommodation on a long-term basis, the government’s Rent a Room scheme enables you to earn up to £7,500 each year tax-free.
You can benefit from the allowance if you’re a resident landlord or if you run a bed and breakfast or a guest house.
But if you share the income with a partner or someone else, the allowance is automatically halved to £3,750.
Mortgage interest tax credit
From April last year, mortgage interest tax relief was completely phased out for landlords and replaced with a tax credit equivalent to 20% of mortgage interest payments.
The change, which is less generous to higher rate taxpayers than the old system, means costs incurred by landlords are no longer deducted from their income, but are instead offset against their final tax bill.
Although the change was introduced in full last year, its impact will only be felt from the start of this tax year, as the majority of landlords pay their income tax through self-assessment, which is completed once the relevant tax year has ended.
Inheritance tax and the residence nil-rate band
Inheritance tax is paid at a rate of 40% on all assets worth more than £325,000 left to someone who is not a spouse or civil partner this tax year.
And there is an additional allowance of £175,000, known as the residence nil-rate band, for when a home is left to a direct descendant.
The residence nil-rate band still applies if someone downsized or ceased to own a home after 8 July 2015, but passes on assets of an equivalent value to a direct descendant.
The allowance is tapered for people with estates valued at more than £2m.
ISA allowance
If you are saving for a deposit to buy a new home, consider making use of your ISA allowance.
Under the rules, you can save up to £20,000 in the current tax year into one ISA, or split the allowance between different ISAs, with any interest or gains made on the money tax-free.
If you are a first-time buyer, look at a Lifetime ISA, into which you can save £4,000 each tax year, with the government contributing 25p for every £1 saved, giving a maximum tax-free bonus of £1,000 a year.
Lifetime ISAs can only be opened by people aged between 18 and 39, and the money saved in them has to be used for either a deposit on a first home or for retirement.
Making Tax Digital rules
If you are a landlord who operates as a limited company, rather than an individual, you will need to get to grips with the government’s new Making Tax Digital rules.
From April 2022, all VAT-registered businesses, regardless of turnover, will be required to have a digital tax accounting, meaning you will have to get one set up this year.
Under the new rules, landlords will have to send HMRC quarterly updates on their income and expenses instead of completing an annual tax return.
What is the tax year?
The tax year is a 12-month period of time that is used to calculate taxes and organise finances.
When is the tax year?
The tax year follows the same structure, beginning on 6 April and ending on 5 April.
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