The new tax year begins next week. On 6 April, to be precise.
- But what do property investors, landlords and brokers need to know about the 2022/23 tax year?
- How MFS can assist property buyers in the year ahead through flexible finance solutions and competitive bridging loan rates?
We answer both of these questions below.
1) Tax rates
What will the tax rates be for 2022/23? This is one of the most common questions that landlords ask. The table below provides an overview:
The tax rates for the coming financial year are the same as those for the one that is soon-to-end. In fact, the Government has said that these tax bands and rates are set to remain at this level until 2026.
2) Capital gains tax
It also important to remember that, in the Autumn Budget in late 2021, the Government doubled the time property investors had to report and pay capital gains tax. In the 2022/23 tax year, landlords and investors who sell a residential property will have 60 days (up from 30) to complete the capital gains tax process.
3) Mortgage relief and tax credits
When the new tax year starts on 6 April, it will have been five years since the mortgage restriction tax changes were introduced. Buy-to-let mortgage tax relief has now been reduced to zero. Instead, during the 2022/23 tax year, landlords will receive a 20% tax credit on interest payments.
It is worth noting that the mortgage restrictions only apply to individuals. That is why many people choose to purchase buy-to-let properties through a limited company, where they are effectively taxed on profit rather than income.
According to data from Companies House, 47,400 new buy-to-let companies were incorporated across the UK in 2021 – a record for a single year. There are now approximately 269,300 such companies, which is up 61% since April 2017, when mortgage interest relief was withdrawn. This trend is likely to continue during the 2022/23 financial year.
Source: Property Industry Eye
The upcoming financial year is also likely to be dominated by macroeconomic trends. Namely, interest rates, inflation and energy prices. Interest rates have already risen three times in as many months. The Bank of England’s base rate has jumped from 0.1% in December 2021 to its current level of 0.75%. Further increases could lie ahead, should inflation continue to rise. Rising interest rates will affect the amount the property buyers and investors can afford to borrow. Indeed, for anyone needing help to establish how much they can or should borrow, why not use our bridging loan calculator?
Inflation, meanwhile, continues to dominate the headlines. It was recently revealed that the consumer price index, or CPI, which is used to monitor the cost of living, had reached 6.2%. In response, the Chancellor used the Spring Statement to offer support to people across the UK:
- Homeowners will not pay any VAT on energy efficiency materials such as solar panels, heat pumps or insulation
- Fuel duty will be cut by 5p per litre until March 2023
- The basic rate of income tax has been promised to be cut from 20% to 19% by the end of this Parliament
These economic trends – and Westminster’s response to them – will impact everyone, from renters and buyers to investors and landlords. During the 2022/23 tax year, landlords will need to monitor these trends carefully and, working with brokers and lenders, ensure they have the right finance solutions in place.
Flexible finance solutions
In the current economic climate, flexibility is vital. This includes investors who might consider applying for a bridging loan or buy-to-let mortgage, as well as those who already have loans against their names.
From refinancing and second charge loans to large loans and bridging finance solutions, MFS can help property investors thanks to our fast, flexible and varied products.
Get in touch with the team today to find out more about our bridging lending and buy-to-let lending options.