The UK’s impending Budget next month may prompt landlords to review their investments with advisers, warns a tax partner.
Dawn Register, partner in tax dispute resolution at BDO, says: “Landlords seem to have been hit by so many tax changes, that a lot of private individuals will need both tax and financial advice.
“If so, do they want to change their investments because of that?”
The UK is due to hold its next Budget on March 11.
The last time the UK had a Budget was in 2018, as the Budget last year got delayed when Boris Johnson announced he was going to hold a general election.
Landlords already suffered a number of changes in recent years. The 2018 Budget brought in a stamp duty surcharge for international buyers, among other measures, while previous Budgets had similarly tightened tax screws on landlords.
Buy-to-let landlords suffered another blow with former chancellor Philip Hammond’s announcement that from April 2020 lettings relief will be reformed.
Lettings relief helps lower capital gains tax on the sale of a property that was at some point used as the seller’s residence but has since been let out as residential accommodation.
Under the previous private residence relief system, the owner gets relief on the years they have lived in the home and on the last 18 months they owned the home, even if the person was not living there in that time period. This is now being lowered to nine months.
Ms Register calls for a simplification of the UK tax system and predicts that sweeping reforms will happen to the UK’s Enterprise Investment Schemes.
“We would like to see some simplification in pensions and inheritance tax, [we] would like to see the tax system supporting entrepreneurs.”
At present, one can only apply for EIS manually.
“Being able to apply for EIS status online [is a necessary change required to simplify the system],” she says.
“Small and medium-sized companies are the lifeblood of the UK economy and we would like to see the tax system continue to support that,” she adds.
According to Ms Register, one of the biggest themes facing the financial advice industry will be how advisers deal with clients who have foreign income.
“The area that HM Revenue & Customs and I see a lot is people with foreign income and making sure that is correctly reported by the individuals on their tax returns.”
She refers to the common reporting standards, an information standard for the automatic exchange of information regarding bank accounts between the tax authorities in a number of countries and how it has made it more important for advisers to currently identify where clients’ investments are domiciled.
“We had a lady who got a letter from HMRC, which said, ‘We think you have a foreign income gain’.