The Office of Tax Simplification (OTS) has invited landlords to share their views on how to simplify property income taxation.
It has published an online survey and call for evidence and wants to hear directly from individual landlords and small businesses about which aspects are particularly complex and hard to get right, and welcomes any suggestions for improvements. It is looking into the current regimes for taxing residential property held by individuals, partnerships and micro companies, and will come up with recommendations and ways to address distortions.
Call for evidence
The call for evidence wants detailed comments on the technical and practical operation of the tax system while the OTS will also meet interested parties online. Questions in the survey include: what prompts landlords to incorporate their property rental businesses and to what extent such decisions are motivated by tax or non-tax reasons, and what factors influence the choice between using the cash basis and accruals basis accounting, where rental income is less than £150,000 a year.
HMRC statistics suggest that there were about 2.9m individuals and 32,000 partnerships with property businesses filing tax returns in the 2018-19 tax year. Companies are subject to corporation tax on their profits from renting property and have no restrictions on the amount of mortgage interest they can deduct.
In 2020, a record number of UK and international landlords registered as a limited company to take advantage of tax benefits; investment specialist Thirlmere Deacon reported a total of 41,700 buy-to-let incorporations, an increase of 23% on 2019, taking the total number of buy-to-let firms to 228,743.