HMRC Shifts Self-Assessment Filing Deadlines

Landlords have some breathing space to pay their self-assessment tax thanks to HM Revenue & Customs giving extra time before late payment penalties kick in. 

The grace period is because HMRC recognises the coronavirus pandemic’s pressure on businesses and their tax advisers. 

More than 6 million taxpayers still have to file a return, says HMRC, and although the deadline stays at midnight on January 31, extra measures delay when penalties start.

The move lifts taxpayers’ automatic £100 penalty for filing after midnight on the deadline day.

Instead, the penalties are nil for anyone missing the January 31 deadline who files their return by February 28 or paying their tax in full or agrees time to pay by April 1.

Interest is still charged when late filing.

However, HMRC will charge interest at a rate of 2.75 per cent on late tax payments from February 1.

Lucy Frazer, Financial Secretary to the Treasury, said: “We recognise that Omicron is putting people under pressure, so we are giving millions of people more breathing space to manage their tax affairs.

“Waiving late filing and payment penalties will help ease financial burdens and protect livelihoods as we navigate the months ahead.

The 2021-22 tax calendar changes in line with the HMRC delayed filing dates to

January 31 – Self Assessment deadline for filing returns and paying tax bills, including any first payment on account

February 1 – interest is charged on outstanding tax bills

February 28 – the last date to file any late online tax returns to avoid a late filing penalty

April 1 – the last date to pay any outstanding tax or make a Time to Pay arrangement to avoid a late payment penalty

April 1 – the last date to set up a self-serve Time to Pay arrangement online

July 31 – any second payment on account is due

Do you need to file a return?

With only a few days remaining before the first deadline, here are some tips on filing a 2021-22 self-assessment tax return for landlords:

Check you are allocating income and expenses to the correct tax year. This year’s deadlines are for the 2020-21 tax year, which ran from April 6, 2020, until April 5, 2021.

The income is tax-free if you raked in rents of £1,000 or less. You do not need to file a return declaring the money.

If your rents add up to between £1,000 and £2,500, talk to HMRC because you may not need to file a return.

You must prepare a tax return even if you have no income to declare if HMRC has written and asked you to file one.

How much tax do landlords pay?

How much income tax a landlord pays depends on their level of earnings from a property and other sources.

The income bands are

IncomeTax rate
£0 to £12,5000%
£12,501 to £50,00020%
£50,001 to £150,00040%

Source: HMRC

To determine how much tax you will pay, add up your earnings from work, savings, pensions and investments.

Say you earn £38,000 from work. The first £12,500 is tax-free, leaving £25,500 taxed at 20 per cent.

Add your rental profit. If the gain is £12,000 or less, the tax rate is 20 per cent.

If your rental profits take your income into the next banding (£50,000 – £150,000), the total less £50,000 is subject to income tax at 40 per cent.

Do landlords pay NI?

Landlords with a rental profit of more than £6,475 may need to pay National Insurance if HMRC decides they are running a business rather than taking an income from investments.

You are likely to pay NI if letting property you own is your primary job, you have several letting properties or are an active buy-to-let purchaser.

The dreaded mortgage interest relief

This is the first self-assessment return for landlords under the financial interest relief rules since 2017.

Landlords can deduct a 20 per cent tax credit for mortgage interest repayments and other credit arrangements, like loans, overdrafts and credit cards.

Taxpayers paying at the 40 and 45 per cent rates can only claim 20% relief.

Don’t forget to deduct expenses.

The list of expenses landlords can set off against letting income is lengthy, so ensure you have legitimately claimed all you can.

You can include a wide range of office, travel and maintenance costs.

Remember, every £5 claimed as a property business expense saves paying at least £1 in tax.

HMRC keeps a list of buy-to-let expenses online here

Have more than one property business?

You may have more than one property business if you have to buy to lets in the UK and overseas or holiday lets in the European Economic Area.

You need to complete a Corporation Tax return if you have a property company.

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