Buy-to-let Changes Are Coming — Landlords Beware

Landlords warned over tax on Income from lettings & property investmentsA warning and reminder to landlords: the Chancellor’s Summer budget back in July will hit buy-to-let investors’ profits once the changes kick in, so now is the time to start planning ahead. Not all landlords will be affected though; if their rental property is mortgage free or if they sell within the next 2 years these changes won’t affect them. However those landlords that are Higher and Additional taxpayers will notice their tax relief reduce by 2020. Also, investors near the tax threshold could find themselves in the next tax bracket, which could have a knock-on effect and increase their tax exposure.

So what are the proposed tax changes?

There are basically two:

  1. Firstly, the amount of tax relief landlords can claim on their mortgage interest will now be capped at basic rate and;
  2. Secondly, landlords will no longer be able to subtract their mortgage interest from their rental income before they calculate their taxable profit.

One in five landlords are expected to have to pay more tax because of these changes, however the new rules will not be phased in until between 2017 and 2021 according to the latest information.

What steps can landlords take?

There are several steps that investors can take to conserve as much profit as possible and to limit the amount of any extra tax payable. For example: re-mortgaging to make sure they have the best deal, getting their finances in tip-top order so they are as tax-efficient as possible, reassessing their properties and possibly even becoming a company. This is where they will need expert tax advice, which is where we come in …

TaxFile have a specialist team that can advise on tax issues including those relating to property, lettings income and investments. As experts in the field they will be able to advise landlords and property investors on all aspects of the above and on any other tax-related matters.  Contact TaxFile on 0208 761 8000, call in and see them at their branch in Tulse Hill, South London, SE21 or book a free introductory appointment online.