Five buy-to-let tax rules for landlords to watch out for in 2023 (2024)

New tax rules for buy-to-let landlords

Here’s an overview of all the tax rules and changes landlords need to be aware of in 2023:

• Buy-to-let income tax rates 2023

• Capital gains tax allowances reduced

• Corporation tax rate rise

• Making Tax Digital delayed

• Stamp duty discount

Buy-to-let income tax rates 2023

So what exactly are the individual income tax rates and bands for 2023-24? Your personal allowance is the amount you can earn before you start paying income tax.

Currently this is £12,570, and it’s been frozen until 2028.

For the 2023-24 tax year, landlords will pay 20 per cent tax on buy-to-let income between £12,571 and £50,270.

The higher rate threshold for rental income is £50,271, which is the point at which you start paying 40 per cent tax on your profits.

The additional rate (45 per cent) threshold has been reduced from £150,000 to £125,001 and above.

This buy-to-let tax calculator from Commercial Trust can give you an idea of how much your next tax bill could be.

Read more: How to do a landlord tax return – a 6-step guide

Capital gains tax allowances reduced

From April 2023, the capital gains tax (CGT) allowance has been more than halved from £12,300 to £6,000.

And from April 2024, it will be halved again from £6,000 to £3,000.

This means that when landlords sell their properties, their capital gains tax bill will be higher.

According to research by Hamptons:

• the average landlord will pay £1,770 more in CGT when selling a property in 2023

• the average landlord will pay £2,610 more in CGT when selling a property in 2024

It predicts that the average landlord’s CGT bill will rise to more than £23,000 in 2023 and around £24,000 by 2024.

Read our comprehensive guide to capital gains tax for more information.

Corporation tax rate rise

​​Since buy-to-let mortgage interest tax relief was reduced to the basic rate of income tax, a high number of landlords have transferred ownership of their buy-to-let portfolios to a limited company.

This means that they have to pay corporation tax instead of completing a Self Assessment.

From April 2023, the corporation tax rate for companies with profits above £250,000 increased from 19 per cent to 25 per cent.

Landlords with a limited company portfolio that generates profits of between £50,001 and £250,000 will pay corporation tax at 25 per cent, reduced by a marginal relief. This means they’ll pay a gradually higher tax rate based on how much they earn.

Landlords who make annual profits of up to £50,000 will continue to pay corporation tax at 19 per cent.

Read more: A guide to UK corporation tax

Making Tax Digital delayed

Making Tax Digital (MTD), the government’s initiative to make all tax returns digital, has faced a number of delays in recent years.

It was originally due to be introduced for all Self Assessment taxpayers in 2023, but is now set for 2026 following two separate delays.

As a result, landlords who earn more than £50,000 a year will have to submit their tax returns using Making Tax Digital compatible software from 6 April 2026.

Landlords who earn between £30,000 and £50,000 will need to start submitting via MTD from 6 April 2027.

And for those earning under £30,000 a year, it’s still not clear when you’ll need to submit tax returns using MTD software.

Making Tax Digital has been in place for all VAT-registered businesses since 2022.

Landlords can still benefit from stamp duty cut

In September 2022’s mini-Budget, a stamp duty cut was announced. The threshold for property buyers was increased from £125,000 to £250,000.

Before the cut, landlords and property investors had to pay a stamp duty rate of three per cent on properties bought for up to £125,000 and five per cent on properties between £125,001 and £250,000.

Thanks to the stamp duty cut, they’ll pay a flat rate of three per cent on all purchases up to £250,000 allowing them to make some savings.

Stamp duty rates are set to return to normal from March 2025, meaning landlords buying cheaper properties will no longer benefit from a discount.

You can use the government’s stamp duty calculator to work out how much tax you’d need to pay when buying a rental property.

What about other buy-to-let regulation changes?

As well as tax changes, there are further updates to regulations that landlords should know about for 2023.

So far this year there have been regulatory updates on:

• minimum energy efficiency standards

• evicting anti-social tenants

However, landlords and tenants are still waiting for news on the government’s long-awaited rental reforms, including banning Section 21 evictions.

How are you managing buy-to-let tax changes in 2023? Let us know in the comments below.

Guides for buy-to-let landlords

• How to get a buy-to-let mortgage: a simple guide

• A guide to buying property at auction

• Best buy-to-let areas

• What is landlord insurance?