Property income review consultation

The Office of Tax Simplification (OTS) seeks views about how the taxation of property income could be simplified and has launched an online survey.

The OTS wants to hear directly from individual landlords and small businesses as well as professional advisers and representative bodies about which aspects of property income taxation are particularly complex and hard to get right and to hear any suggestions for improvements.

The OTS is the independent adviser to Government, challenging tax complexity to help all users of the tax system and working to improve the experience of all who interact with the tax system.

The call for evidence outlines that income from residential property owned by individual landlords is taxed under one of two different regimes. 

  • The general position is that income tax will be due on the profits from renting out the property, after certain allowable deductions. However, residential property mortgage interest relief is restricted to the basic rate of income tax, and there are no specific capital gains reliefs. 
  • The Furnished Holiday Lettings (FHLs) regime applies to residential property let on short term lets within certain parameters. The income then attracts some additional reliefs as, for example, mortgage interest is fully deductible and capital allowances are available. In addition, Business Asset Disposal Relief is available on gains made when properties are sold.

A Scoping document for the review was published on 1 March 2022.

Questions in the survey relating directly to letting agents include:

  1. Do you think that third parties, such as letting agents, could assist in easing tax administrative burdens and in what ways? 
  2. To what extent could it be helpful to landlords if letting agents, provided data to HMRC on their behalf?
  3. Do any difficulties or benefits arise in relation to letting activities because of the different rules for the taxation of property income and trading income?

The survey is open until 5 June 2022.

Take the Property Income Review online survey  →