Landlords being hit by new tax rules
Landlords are unaware about changes to the mortgage interest relief announced by George Osborne in the 2015 summer budget. It has left many people mistakenly thinking that it only affects higher rate tax payers. In actual fact it also can affect basic rate tax payers by artificially pushing them into the higher rate band.
Until the changes come into effect landlords can offset the interest on mortgage payments against the rental income. So for example you have £15000 per year rental income and pay £13000 in mortgage interest you would be subject to tax on the £2000 profit. This would be the amount that was the part of your income subject to tax at your applicable tax rate.
In the new changes you will have income of £15000. But get a tax credit equal to 20% of the mortgage interest so if you have other income this massive spike in your income could mean that you end up in the higher tax band.
These changes are being phased in from the 2017-2018 tax year and gradually becoming into full effect by 2020.
These changes are in addition to the removal of the wear and tear allowance. Also the increased stamp duty aimed at buy to let properties.
We do offer a specialist landlord accountancy service
by our expert accountants who are also landlords
If you think you might be affected you are advised to contact us
to see how we can help with your tax planning arrangements.
Contact us and let us make a real difference TODAY!
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