Most of the financial stories this week have centred on the Chancellor’s annual Budget. Before the budget, journalists speculated on what tax increases we could look forward to, but in the aftermath, the discussion is mostly about how Joe Average will be affected by the Chancellor’s decisions in the coming year.
How will the 2012 Budget affect buy to let landlords?
Well, unless you are operating your multi million pound property portfolio as a business and evading the taxman by stashing your gains in a cosy bank account in the Cayman Islands, you don’t have to worry about the changes to the Stamp Duty legislation. However, you should probably be concerned about your future tax bill.
I read a story in the Telegraph this morning about tax liabilities and how it is likely to affect the average buy to let landlord. With interest rates on mortgages low and demand for rental properties at an all-time high, many of us have been enjoying healthy profits from our property portfolio. But, as always, the taxman is waiting for his share, and for many landlords the tax bill for the 2010/2011 tax year will be correspondingly high. There will also be advanced payments to make for the coming tax year, based on liability from the previous year, so if you had a profitable year last year you can expect your tax instalment payment in July to be correspondingly high.
The combination of tax bill for 2010/2011 and advanced payments for 2011/2012 in January 12 and July 12 could prove catastrophic for the cash flow of many landlords, especially if their mortgages are now reverting back to standard variable rates from a discounted rate. So if you haven’t already done so, make sure you have money set aside to pay the HMRC!
