Results of HMRC enquiries on buy to let property owners and capital are in
Monday 12th January 2015
HMRC has been carefully investigating landlords to identify the true position on rental income and capital gains. Apparently just 500,000 taxpayers are registered as owning a second property but HMRC thinks the true number is nearer 1.5 million.
Rental property does not generally attract the same tax breaks as an individual’s residence and capital gains tax is payable on any gains on the sale of such properties. There can be some tax relief if the rental property has been the owner’s main residence at some time.
HMRC’s investigations into rental properties identified additional capital gains tax of £136 million for 2013/14, almost 25% more than the previous year. It’s not just capital gains to be aware of as rental income is subject to income tax and HMRC has been looking to maximise revenues in this area as well. From this, it seems clear that rental properties will remain under close scrutiny from HMRC in future.
Any taxpayer who is about to buy a second property, or who has two or more properties already, should review and plan their tax position to maximise available reliefs. Even if the second property is not let, it is important that the main residence relief is maximised on the property that has or is likely to increase the most in value.
It is equally important for taxpayers to correctly declare their income or gains on rental properties. Our private client team works closely with our property lawyers to provide tax advice to our clients.