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THE PROPERTY PAPERS OCTOBER - ISSUE 33

LANDLORDS FINANCIAL EST. 2013

CONTENTS | OCTOBER 2026

OCTOBER - ISSUE 33

- 06 -

SDLT ON MIXED -USE PROPERTY

- 09 -

HIGH VALUE COUNCIL TAX SURCHARGE

-10 -

USING FHL LOSSES

-13-

HOW TO SPOT BAD TAX ADVICE

-14 -

UNDERSTAND YOUR P800 RECONCILIATION

-16 -

CHILD BENEFIT AND PAYING THE HICBC

-19 -

PAYROLLING BENEFITS VOLUNTARILY IN 2027/28

-20 -

TAX REFUNDS FOR MORE THAN ONE TAX YEAR

OCTOBER - ISSUE 33

The October Update Welcome to the October edition of The Property Papers. As we move further through the 2026/27 tax year, this month’s issue covers a range of important updates and planning considerations for landlords, property investors, and property professionals. Inside, we look at SDLT on mixed-use property, the new High Value Council Tax Surcharge, and how losses from former Furnished Holiday Lets can now be used against profits from the wider property business. We also explore how to spot potentially misleading tax advice, understanding your P800 tax reconciliation, the High Income Child Benefit Charge and options for paying it through PAYE. In addition, we look ahead to changes to benefit payrolling from April 2027 and the new process for claiming tax refunds covering more than one tax year. We hope you find this edition informative, practical, and useful for planning ahead with confidence. As always, if you would like advice tailored to your circumstances, our team is here to help.

LANDLORDS FINANCIAL

OCTOBER - ISSUE 33

SDLT on mixed-use property Stamp duty land tax (SDLT) is payable on the purchase of a property in England or Northern Ireland. There are different rates for residential properties (with a 5% supplement applying to second and subsequent residential properties) and non-residential properties. The non-residential rates also apply to mixed-use properties. The starting point for residential properties is than for nonresidential properties and the rates are higher and the rates applicable to residential properties are higher. Thus, the SDLT bill will be lower for a mixed-use property than for a residential property of the same price. Is the property a mixed-use property? The fact that part of a property is used for business will not in itself make a property a mixed-use property. HMRC draw a distinction between the use of certain rooms for business in what otherwise would be a dwelling (for example, the use of one room as a home office) and a building containing residential accommodation which has been divided into separate areas, one or more of which is used as commercial or business premises (for example, where part of a house has been converted into a shop). Where a room in a house is used as a home office or similar, the room usually remains suitable for use as part of the dwelling house. Consequently, the property is a dwelling house not a mixed-use property and as such the residential stamp duty rates apply. Using the dining room as an office does not make a dwelling a mixed-use property.

Where the property is converted, or used without specific conversion, as part residential accommodation and part commercial and sold as a single interest, the position is more nuanced. Where part of the building is set aside for day-to-day commercial use and that part is used separately from the parts used for accommodation, HMRC will accept that the parts used commercially are not part of the dwelling. Consequently, the property is a mixed-use property and the non-residential SDLT rates will apply. An example here would be a house in which two rooms are dedicated to use as a hairdressers; the rooms converted into the hairdressers are not part of the living accommodation. It is important to note that the use of the rooms does not in itself determine whether the property is a mixed-use property; the degree of conversion and the degree of separation from the living accommodation are key. If the rooms used commercially can easily be incorporated into the residential parts of the building without the need for any adaptation, they will remain part of the dwelling house and the property will not be a mixed-use property for SDLT purposes. However, if the parts used commercially have been converted in such a way that the rooms are not suitable for living accommodation (for example, where part of the property has been converted into a shop, a separate entrance and the installation of shelving, fridges etc.), then the part so converted will no longer be suitable for use as living accommodation; the property will be a mixed-use property and the non-residential SDLT rates will apply.

OCTOBER - ISSUE 33

High Value Council Tax Surcharge From 6 April 2028, a new charge, the High Value Council Tax Surcharge (HVCTS) will apply to owners of residential property in England valued at £2 million or more. The new tax is commonly referred to as the ‘mansion tax’. The charge will apply in addition to the existing council tax charge. The government estimate that fewer than one per cent of properties will fall within the scope of the charge. Liability for the charge will fall on the homeowner rather than the occupier where the property is not owner-occupied. To determine whether a property is within the scope of the charge, the Valuation Office will conduct a targeted valuation exercise. Revaluations are to be conducted every five years. Properties valued at more than £2 million will be placed in a band according to their value, with a charge set for each band. The charging structure for 2028/29 is set out below.

Value

HVCTS

£2m to £2.5m

£2,500

£2.5m to £3.5m

£3,500

£3.5m to £5m

£5,000

£5m plus

£7,500

The charge will increase each year in line with rises in the CPI. It will be administered by local authorities alongside council tax. Consultation Earlier this year, the Government consulted on the detailed design of the charge. The consultation document set out: · the design of the HVCTS; · how the ‘owner’ should be defined; · the proposed support mechanism for those who cannot pay; · the proposed list of property level discounts and exemptions; · the billing and the administration process; · the process by which a homeowner can challenge their banding or their liability; · the enforcement mechanisms for the charge; · an assessment of the impact on those with protected characteristics; and · the approach to valuations. At the time of writing, the government had yet to respond to the consultation. The legislation to give statutory effect to the HVCTS is to be included in a future finance bill.

OCTOBER - ISSUE 33

Using FHL losses

The former tax regime for furnished holiday lettings (FHL) came to an end on 5 April 2025. Prior to this date, properties which qualified as FHLs were kept separate from other lets. This meant that where a loss was made on FHL, that loss could only be carried forward and set against future profits from the same FHL business. However, from 6 April 2025 onwards, FHLs are treated in the same way as other residential lets. This means that income and expenses from properties let as furnished holiday accommodation are amalgamated with rental income and expenses from other properties owned by the same person in the same capacity to arrive at the profit or loss for the property business as a whole. Where the former FHL business had unrelieved losses on 6 April 2025, these losses can be set against future profits from the combined property business, regardless of whether those profits derive from holiday lets, other residential lets or commercial lets. Example Georgina lets out two flats on long-term lets. She also lets out two holiday cottages as furnished holiday accommodation through Airbnb. On 6 April 2025, she has unrelieved losses from her former FHL business of £12,000. The residential lets have always made a profit. She owns all the properties outright. For 2025/26, the income and expenses in respect of each property are as follows:

OCTOBER - ISSUE 33

Property

Rental Income

Expenses

Flat 1

£20,000

£4,000

Flat 2

£12,000

£2,500

Cottage 1

£16,000

£8,500

Cottage 2

£5,000

£7,000

Total

£53,000

£22,000

The profit for the property rental business is £31,000. Georgina is able to set the losses brought forward from the former FHL business against the profit of the amalgamated property business, reducing the taxable rental profit to £19,000. It does not matter that in isolation she only made a profit of £5,500 from her holiday cottages. Relief for the loss is claimed in her 2025/26 tax return.

OCTOBER - ISSUE 33

How to spot bad tax advice HMRC have issued a warning that not all tax advice online is accurate. ‘Finfluencers’ (financial influencers) often present tax advice as ‘quick wins’ without covering the rules. This can be misleading as people may take action without being aware of the risks or whether the featured ‘win’ is appropriate to their circumstances. HMRC have published guidance to help people avoid being caught out by bad tax advice. Spotting tax avoidance Tax avoidance usually involves artificial transactions that serve no real purpose other than claiming falsely to reduce tax. Anyone involved in a tax avoidance scheme will have to pay the tax that they should have paid plus interest, and maybe penalties, so such schemes are best avoided. One way to prevent being caught up in a tax avoidance scheme is to understand how you are being paid. Check your contract and payslips to ensure you are paying the correct amount of tax and National Insurance. Warning signs that all is not well include receiving more money in your bank account than that shown on your payslip or receiving untaxed income, which may be described as a loan or a capital payment. Remember, you are responsible for paying the correct amount of tax, even if you appoint someone to handle your tax affairs. Anyone that thinks that they may be involved in a tax avoidance scheme is advised to contact HMRC as soon as possible.

Umbrella companies Contractors may be employed through an umbrella company. These are often used by recruitment agencies to pay temporary workers. The umbrella company employs and pays the worker but does not find the work – this is the role of the recruitment agency. To check that the umbrella company is not operating a tax avoidance scheme, the worker should check that they have paid the correct amount of tax and National Insurance. HMRC have a tool which can be used for this purpose which is available on the Gov.uk website. They should also check their payslip and be alert for signs of extra payments which may not have been taxed. Reporting a tax avoidance scheme Anyone that has been encouraged to get involved in a tax avoidance scheme, is aware of a tax avoidance scheme or knows of someone selling a tax avoidance scheme should report it to HMRC. Claiming expenses It is easy to get caught out by a tax refund company offering to make tax relief expense claims on your behalf in return for a fee. This might seem like an easy option. However, HMRC are keen to point out that it is easy to check whether you are eligible and to make a claim if you are. Doing it yourself means that you get to keep the full amount of any money that you are owed. The guidance explains when a claim can be made and how to make a claim with HMRC. Remember, if something sounds too good to be true, it probably is.

OCTOBER - ISSUE 33

Understand your P800 reconciliation HMRC send out a P800 tax calculation letter where a person who is employed and/or in receipt of a pension has overpaid or underpaid tax. They will not get a letter if they complete a Self-Assessment tax return instead; their Self-Assessment bill will be adjusted automatically. There are various reasons why a person may receive a letter, for example, because they were on the wrong tax code, they finished one job and started another in the same tax month, they started receiving a pension while they were still working or they received Employment and Support Allowance or Jobseeker’s Allowance. They may owe tax or be due a tax refund as a result. Claiming a refund Where the taxpayer is due a tax refund, the P800 letter will explain how to claim that refund. Where the letter states that the refund can be claimed online, the taxpayer can make the claim by visiting the Gov.uk website at www.gov.uk/tax-overpaymentsand-underpayments/if-youre-due-a-refund. Claims can also be made through the taxpayer’s personal tax account or the HMRC app or by contacting HMRC. Where a claim is made online, the refund should be received in five working days. If the tax calculation letter states that the taxpayer will get a cheque, they do not need to do anything – the cheque will normally be received within 14 days of the date on the P800 letter.

Owing tax If the P800 tax calculation letter says that the taxpayer owes tax, HMRC will usually collect this by amending the taxpayer’s tax code so as to collect the tax that is owed from the taxpayer’s wages in 12 equal instalments. This will happen automatically where the taxpayer pays tax under PAYE on employment income or a pension, their income exceeds their personal allowance by a sufficient amount to collect the tax due and the amount owed is less than £3,000. If the tax cannot be collected in this way, HMRC will write to the taxpayer. Check the calculation It is dangerous to simply assume the tax calculation is correct – it should always be checked. Particular problems are known to arise as regards the allocation of allowances where the taxpayer has more than one source of income. Under current rules, allowances should be allocated so as to give the best outcome. However, in practice this does not always happen, and errors can result particularly in relation to the application of the savings nil rate band. If you think the calculation is wrong, contact HMRC. If they agree that the calculation is incorrect, they will issue a new one. If they don’t agree, they will explain why.

OCTOBER - ISSUE 33

Child benefit and paying the HICBC The High Income Child Benefit Charge (HICBC) claws back child benefit if the recipient and/or their partner earns more than the threshold. For 2026/27, the charge applies once adjusted net income exceeds £60,000. Where both the recipient and their partner have adjusted net income of more than £60,000, the charge is levied on the one with the highest income. The person liable to pay the charge may not be the person who received the child benefit. The charge claws back 1% of the child benefit for the tax year for every £200 by which adjusted net income exceeds £60,000. Once adjusted net income reaches £80,000, the HICBC is equal to the child benefit for the year. For 2026/27, child benefit is set at £27.05 per week for the eldest child and £17.90 per week for each additional child. Opting not to receive the benefit Where the HICBC will claw back all the child benefit for the tax year (which will be the case where adjusted net income is £80,000 or more), it may be preferable not to receive the child benefit rather than receiving it and paying it back. A person can opt out of receiving child benefit either by using the online service or completing the online form. It is important to claim child benefit then opt out (rather than simply not claiming it) to benefit from the associated National Insurance credits, particularly where the claimant would not otherwise secure a qualifying year for state pension purposes.

OCTOBER - ISSUE 33

Paying the charge through Self-Assessment It used to be the case where a taxpayer needed to pay the HICBC, they had to register for Self-Assessment if not already registered and pay the charge through the Self-Assessment system. However, with the introduction of the PAYE service, the charge is now only payable through Self-Assessment where the person needs to send in a Self-Assessment tax return for another reason (as will be the case, for example, if they have trading, property or investment income) or if they have not paid the charge by 31 January after the end of the tax year to which it relates. Paying the charge through PAYE A new service was launched last year which allows taxpayers to pay the HICBC through PAYE, removing the need to register for Self-Assessment solely to pay the HICBC. The taxpayer’s tax code will be adjusted to collect the HICBC through PAYE. Taxpayers must register to use this service. However, the charge can only be paid through PAYE if all the following apply: · the taxpayer does not need to file a Self-Assessment return for another reason; · they are paying the tax for the current or previous tax year onwards; and · it is before 31 January after the end of the tax year to which the charge relates. A person who previously paid the charge through Self-Assessment can switch to paying through PAYE by contacting HMRC to be removed from Self-Assessment and to register to pay the charge through PAYE. If a person needs to be within Self-Assessment for another reason, the charge must be paid through Self-Assessment – it cannot be paid through PAYE.

OCTOBER - ISSUE 33

Payrolling benefits voluntarily in 2027/28 Mandatory payrolling is now being introduced in stages. From 6 April 2027 onwards, employers will be required to payroll: · company cars; · car fuel; · vans; · van fuel; and · medical benefits. For 2027/28, employers can opt to payroll all other benefits voluntarily, including taxable cheap employment-related loans and living accommodation benefits which cannot currently be payrolled. However, non-mandatory benefits can only be payrolled in 2027/28 if they have been registered for payrolling.

2028/29 From 6 April 2028, all remaining benefits with the exception of taxable cheap employment-related loans and living accommodation benefits will be brought within mandatory payrolling. The only benefits for which payrolling is voluntary in 2028/29 are employmentrelated loans and living accommodation benefits. Employers will be able to payroll these voluntarily if they have registered them for payrolling using the new service.

New service The service previously used to register benefits in kind for payrolling has been closed down. It is to be replaced with a new service which is to be launched in November 2026. From that date, employers will be able to register benefits for voluntary payrolling from 6 April 2027. Where benefits are not registered for voluntary payrolling in 2027/28, the employer will continue to report them to HMRC after the year end on the employee’s P11D. To voluntarily payroll benefits in 2027/28, they must be registered before the start of the 2027/28 tax year.

OCTOBER - ISSUE 33

Tax refunds for more than one tax year HMRC are changing the way that tax refunds are made to the majority of taxpayers who make a multi-year P800 tax refund claim. Claims must usually be made no later than four years from the end of the tax year to which the claim relates. Employees making a claim for a multi-year tax refund will need to request their repayment using HMRC’s digital services. They will no longer receive the repayment automatically by cheque. This change brings multi-year refunds in line with the wider P800 repayment process under which taxpayers must take action in order to receive money that they are owed by HMRC. Once a multi-year claim has been processed, the taxpayer will receive a P800 tax calculation letter which will ask them to request their repayment. The quickest way to do this is through their HMRC personal account or via the HMRC app. However, the taxpayer does not need to be fully set up for HMRC’s online service in order to request their repayment as they can request their refund using the online service on the Gov.uk website at www.gov.uk/tax-overpayments-and-underpayments rather than signing in through the Government Gateway. To do this, they will need the unique reference number in their P800 letter and their National Insurance number. Taxpayers who are digitally excluded or who prefer a cheque can still get one, although they will need to wait longer for their money.

OCTOBER - ISSUE 33

Dedicated Property Accounting You Can Trust At Landlords Financial, we provide specialist bookkeeping, accounting and taxation services exclusively for the property sector. We help landlords, investors, and agents stay compliant, organised, and financially confident. From bookkeeping and monthly management accounts to year-end filings and all property-related taxes, including VAT, Corporation Tax, ATED, and payroll, we keep your finances in order with clear, accurate, and reliable reporting. Fixed-fee options make budgeting simple for UK and overseas clients alike. We also offer specialist service charge accounting for residential and commercial properties, delivering transparent, trustworthy reports for tenants and stakeholders. With dedicated property expertise, straightforward communication, and professional, reliable support, we make managing your property finances simple. Contact us today for a complimentary consultation.

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