THE PROPERTY PAPERS NOVEMBER - ISSUE 34
LANDLORDS FINANCIAL EST. 2013
CONTENTS | NOVEMBER 2026
NOVEMBER - ISSUE 34
- 06 -
NEW PROPERTY INCOME TAX RATES AND RELIEF FOR INTEREST AND FINANCE COSTS
- 09 -
SDLT AND FIRST-TIME BUYERS
-10 -
RELIEF FOR CAPITAL EXPENDITURE UNDER THE CASH BASIS
-13-
NEW REPORTING REQUIREMENTS FOR COMPANY DIRECTORS
-14 -
WINTER FUEL PAYMENTS
-16 -
WHY FILE YOUR 2025/26 TAX RETURN BY 30 DECEMBER 2026?
-19 -
TAX ON SAVINGS INCOME FROM 6 APRIL 2027
-20 -
LOWER MTD THRESHOLD FROM APRIL 2027
NOVEMBER - ISSUE 34
The November Update Welcome to the November edition of The Property Papers. This month, we explore several important tax changes and considerations for landlords, property investors and property professionals. With new property income tax rates due to take effect from April 2027, we look at what these changes could mean for landlords, alongside the rules for interest and finance cost relief, Stamp Duty Land Tax for first-time buyers, and claiming relief for capital expenditure under the Cash Basis. We also cover new reporting requirements for company directors, the latest guidance on Winter Fuel Payments, and why filing your 2025/26 Self-Assessment tax return by 30 December could help you manage your tax bill through PAYE. In addition, this edition examines upcoming changes to savings income tax rates and the reduction in the income threshold for Making Tax Digital for Income Tax. As always, our aim is to provide clear, practical information to help you understand the latest developments and consider how they may affect your circumstances.
LANDLORDS FINANCIAL
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New property income tax rates and relief for interest and finance costs From 6 April 2027, landlords running an unincorporated property business will pay tax on the profits of their property rental business at the new property income tax rates. For 2027/28, the property basic rate is set at 22%, the property higher rate is set at 42% and the property additional rate is 47%. Property income is charged to tax after trading, employment and pension income. The introduction of the property income tax rates will impact on the rate at which landlords running an unincorporated property business secure relief for interest and finance costs that they incur. The way in which relief is given depends on whether the interest and finance costs relate to residential or non-residential lets. Relief for interest and finance costs relating to residential lets is not deducted in computing taxable rental profits. Instead, relief is given as a tax reduction. Currently, the reduction is determined by reference to the basic rate of tax (set at 20% for 2026/27) and is equal to 20% of the residential interest and finance costs capped at the lower of: · 20% of the interest and finance costs; · 20% of the property business profits; and · 20% of the landlord’s adjusted net income.
Where it is not possible to relieve the costs in full (as would be the case if the property business made a loss), the unrelieved costs are carried forward for relief in future years. For 2027/28 and later tax years, the tax reduction will be calculated by reference to the property basic rate, set at 22% for 2027/28. Consequently, for 2027/28, landlords running an unincorporated property business will be entitled to a tax reduction of 22% of their residential interest and finance costs capped at the lower of: · 22% of the interest and finance costs; · 22% of the property business profits; and · 22% of the landlord’s adjusted net income. The interest relief restriction does not apply to interest and finance costs incurred in relation to non-residential lets. Instead, the landlord can deduct these costs in calculating the taxable profits of their property rental business. For 2026/27 and earlier tax years, relief for these costs is given at the landlord’s marginal rate of income tax. From 2027/28, the landlord will secure relief for interest and finance costs in respect of non-residential lets at their marginal property income tax rate.
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SDLT and first-time buyers First-time buyers in England and Northern Ireland may be able to claim a stamp duty land tax (SDLT) discount when they buy their first home. In the absence of first-time buyer relief, the purchaser would pay SDLT at the rates shown in the table below. Consideration
SDLT Rate
First £125,000
Nil
Next £125,000 (from £125,001 to £250,000)
2%
Next £675,000 (from £250,001 to ££925,000)
5%
Next £575,000 (from £925,001 to £!.5 million)
10%
Remaining consideration above £1.5 million)
12%
A 5% supplement applies to second and subsequent residential properties costing £40,000 or more. First-time buyer relief is available where the purchaser buys on their own and is a firsttime buyer or, where two or more people are buying the property together, they are all first-time buyers. If any of the purchasers are not a first-time buyer, the relief is not available.
First-time buyer relief is only available if the purchase price of the property is £500,000 or less. The threshold takes no account of regional differences in prices.Where the property price exceeds £500,000, first-time buyer relief is not available and SDLT is payable at the normal residential rates. Where first-time buyer relief is available, the purchaser(s) will pay no SDLT on the first £300,000 and SDLT at 5% on the portion from £300,001 to £500,000. The relief is worth up to £5,000. Example 1 Callum is a first-time buyer. He buys a flat costing £280,000. As he is a first-time buyer and the purchase price is less than £300,000, Callum pays no SDLT. Had Callum not been a first-time buyer, he would have paid SDLT of £4,000 ((£125,000 @ 2%) + (£30,000 @ 5%)). The first-time buyer discount saves Callum £4,000. Example 2 Darcey is a first-time buyer. She bought her first home, a two-bedroom cottage, for £420,000. As she qualifies for first-time buyer relief, she pays SDLT of £6,000 ((£300,000 @ 0%) + (£120,000 @ 5%)). Had Darcey not been a first-time buyer, she would have paid SDLT of £11,000. The firsttime buyer discount saves her £5,000. Example 3 Emily is a first-time buyer. She bought her first home for £600,000. As the purchase price exceeds £500,000, she is not entitled to the first-time buyer discount and must pay SDLT at the normal residential rates. She pays SDLT of £20,000.
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Relief for capital expenditure under the cash basis
The cash basis is the default basis of accounts preparation for landlords running an unincorporated property business where their annual rental income is £150,000 or less. Unlike the accrual basis, there is no need to take account of debtors and creditors and prepayments and accruals – income is taken into account when received and expenses when paid. The cash basis has its own rules for capital expenditure too, and the general prohibition on deducting capital expenditure does not apply. Instead, under the cash basis, a landlord is able to deduct items of capital expenditure unless such a deduction is expressly prohibited. This is the case where expenditure on an item of a capital nature is incurred on or in connection with the provision, alteration or disposal of: · any asset that is not a depreciating asset; · any asset that is not acquired for use on a continuing basis in the property business; · a car; · land; · a non-qualifying intangible asset, including education or training; or · a financial asset. A depreciating asset is one which within 20 years is either no longer of use as a business asset or has a value of 10% or less of its value at the time that the expenditure on it was originally incurred.
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In addition, the landlord cannot deduct capital expenditure that is incurred on or in connection with the acquisition or disposal of a business or part of a business. If a deduction is not permitted under the cash basis, relief may instead be available through the capital allowances system. Where a landlord lets residential property, including furnished holiday lettings, relief for expenditure on domestic items is instead given under the separate rules for replacement domestic items. These prohibit relief for the cost of the original item but allow a deduction for a like-for-like replacement. Example Tom runs an unincorporated property business. In 2027/28 he spends £20,000 on a new van and £30,000 on a new car, both of which are used exclusively for the purposes of the property business. He prepares his accounts using the cash basis. Under the cash basis capital expenditure rules, he can deduct the cost of the van when calculating his taxable rental profit. However, under the rules, a deduction for the cost of the car is prohibited. He claims a writing down allowance instead.
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New reporting requirements for company directors For 2025/26 onwards, directors must provide additional information when completing their Self-Assessment tax return. The 2025/26 Self-Assessment return must be filed online by midnight on 31 January 2027. All directors are now required to confirm whether they were a director of a company during the relevant tax year. If the company was a close company, this too must be confirmed. Directors of close companies must also provide the following information in their tax return: · the name and registered number of the company; · the amount received by way of dividend income from the close company during the year (which may be zero); and · the percentage of the share capital of the close company held by the person (which may be zero). If that percentage has changed during the tax year in question, the percentage provided on the return should be the highest percentage held during the year. The information should be provided on the SA102 employment pages of the return. Question 6 asks whether the individual was a director of the company. Where the directorship ceased in the tax year, the date of cessation should be entered in box 6.1. The director must confirm whether the company is a close company in box 7. Where it is, they must provide the name of the company in box 7.1 and its company registration number in box 7.2.
The director must also provide details of any dividends received from the company in the tax year in box 7.3 and their percentage shareholding in box 7.4. Each directorship (including that of a dormant company) should be reported through the SA102 employment pages, even if the director was not a shareholder during the tax year and had no remuneration. The new reporting requirements provide HMRC with more information and allow them to cross-check the dividends provided in the director’s tax return with the company’s account.
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NOVEMBER - ISSUE 34
Winter Fuel Payments Individuals born on or before 27 June 1960 may, depending on their income, receive help with their heating bills for the winter of 2026/27 in the form of a Winter Fuel Payment of between £100 and £300. The amount which a person will receive depends on their date of birth and their circumstances in the qualifying week (21–27 September 2026). Payments will normally be made in November or December 2026 and people who are eligible should receive a letter in October or November 2026 telling them how much they will get. The Winter Fuel Payment is not available to individuals whose total income is more than £35,000 for the tax year. There is no taper – it is an all or nothing payment. Individuals with income of more than £35,000 had the option of opting out of receiving the Winter Fuel Payment, but this had to be done by 20 September 2026. Where an individual has not opted out, they will receive the payment, but if their total income for 2026/27 is more than £35,000, HMRC will take it back. This will normally be done by changing the individual’s tax code but can be collected through SelfAssessment where they complete a SelfAssessment tax return. Where the payments are clawed back through the tax code, HMRC have recently announced that they start collecting the payments for 2026/27 from January 2027 rather than from April 2027 as previously announced. Individuals affected may find that for the last few months of the 2026/27 tax year, they are paying back Winter Fuel Payments for both 2025/26 and 2026/27.
Where the Winter Fuel Payment is repaid through Self-Assessment, the payment should be included in the return for the year in which it is received, so that payments received for winter 2026/27 should be included in the 2026/27 tax return, which must be filed online by 31 January 2028. The payments will usually be pre-populated in the return. However, it is prudent to check that the figures are correct.
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Why file your 2025/26 tax return by 30 December 2026? Taxpayers who need to file a Self-Assessment tax return for 2025/26 must do so online before midnight on 31 January 2027. If they receive their notice to file after 31 October 2026, a later deadline of three months from the date of the notice applies. However, any tax due must still be paid by 31 January 2027. However, where an individual owes tax and they want to pay what they owe through an adjustment to their tax code, they must file their return by 11.59pm on 30 December 2026. Where a paper return is filed, this must be filed by 31 October 2026. A taxpayer can pay their Self-Assessment tax bill through their tax code if all of the following apply: · the amount owed is less than £3,000; · they already pay tax through PAYE, for example, because they are an employee or because they receive a company pension; and · they filed their 2025/26 tax return online by 30 December 2026 or filed a paper return by 31 October 2026. It should be noted that this route is only available where the total amount owed under SelfAssessment is less than £3,000 – if the amount due is more than £3,000, it is not possible to make a payment to reduce the outstanding balance to below £3,000 and then pay this through the tax code.
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However, even if the above conditions are met, a person will not be able to pay their tax bill through their PAYE code: · if they do not have sufficient PAYE income for HMRC to collect the tax that is owed; · if the tax is collected through PAYE, the amount paid in tax would exceed 50% of their income; or · if collecting tax through PAYE would mean that the person would pay twice as much tax as usual. Where the return is filed by 30 December 2026 and the conditions are met, HMRC will automatically adjust the taxpayer’s code to collect the tax that they owe. If the taxpayer does not want to pay in this way, they will need to tell HMRC in their return. Advantages and disadvantages Paying tax through the tax code can be worthwhile. The tax that is owed for 2025/26 is collected via an adjustment to the 2027/28 tax code. This means that if a person is paid monthly, they will pay the tax in 12 instalments over the 2027/28 tax year. For example, if a person owed tax under Self-Assessment of £1,200, they would pay their tax in 12 monthly instalments of £100. However, unlike an instalment plan, there is no interest to pay. On the downside, monthly take-home pay will fall, and this will not suit everyone. Some people may prefer to settle the bill by 31 January 2027 and maintain their monthly income.
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Tax on savings income from 6 April 2027 There are changes ahead for savers. From 6 April 2027, savings income will have its own tax rates – the savings income tax rates. Where savings income is not sheltered by the personal allowance or the savings allowance or taxable at the savings starting rate, for 2027/28 it will be taxed at the savings basic rate of 22% where it falls in the basic rate band, at the savings higher rate of 42% where it falls in the higher rate band and at the savings additional rate of 47% where it falls in the additional rate band. Changes to the ordering rules mean that trading, employment and pension income is taxed before property, savings and dividend income, with savings income treated as the second top slice before dividend income. Reliefs and allowances are allocated in the same order. Basic and higher rate taxpayers will still benefit from the savings personal allowance, set at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. The savings starting rate of 0% will continue to apply to savings income which falls within the savings starting rate band, set at £5,000 but reduced pound for pound to the extent that taxable nonsavings income exceeds £5,000. For example, if a taxpayer has pension income of £14,000 and savings income of £5,000, their savings starting rate band would be reduced by £1,430 (£14,000 – £12,570) to £3,570.
For taxpayers looking to shelter their savings income from tax by investing in an ISA, it should be noted that the cash ISA limit for under 65s is reduced to £12,000 for 2027/28. The overall ISA limit remains at £20,000, but at least £8,000 must be invested in a stocks and shares ISA. Further, any savings income on cash held in a stocks and shares ISA will be taxed at the savings income tax rates. The lower cash ISA limit of £12,000 does not apply to individuals who are aged 65 or older at the end of the tax year who can still invest their full £20,000 limit in a cash ISA.
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Lower MTD threshold from April 2027 Under Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA), individuals within its scope must keep digital records of their trading and property income and expenses and make quarterly returns and a final declaration to HMRC using software that is compatible with MTD for ITSA. From 6 April 2026, individuals whose combined trading and property income was £50,000 or more in 2024/25 were required to comply with MTD for ITSA. The MTD for ITSA threshold drops to £30,000 from 6 April 2027 based on income for 2025/26. It will fall to £20,000 from April 2028. To ascertain whether you will need to join MTD for ITSA from 6 April 2027, you will need to work out your qualifying income for 2025/26. This is your total of trading and property income from all sources before the deduction of expenses. Getting ready If you need to join MTD for ITSA from 6 April 2027, you will need to sign up by visiting the Gov.uk website at www.gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax. Alternatively, your agent can sign you up. If you are filing the returns yourself, you will need to source compatible software. HMRC produce a list of suitable software which can be found on the Gov.uk website at www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax. Alternatively, your agent can file the returns on your behalf.
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MANCHESTER DIDSBURY BUSINESS CENTRE , 137 BARLOW MOOR ROAD, DIDSBURY, MANCHESTER, M20 2PW LONDON 1 HARLEY STREET, MARYLEBONE , LONDON, W 1G 9QD
020 3700 8178 WWW.L ANDLORDSFINANCIAL .COM
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