Property Tax
Tax Facts - a series of proactive tax updates
Buy To Let Landlords
May Face A Tax Increase
Landlords should seek tax advice following the Summer Budget...
One of the surprise announcements that the
Chancellor introduced at the Summer Budget was the
restriction of tax relief on mortgage interest paid in
respect of buy to let residential properties. The tax
relief which is currently given at an individual's
marginal rate of tax will be cut to a maximum of 20%
from April 2020, but will be phased in over four years
starting in April 2017.
An example of the impact of the announcements:
Between now and April 2017, there is an opportunity
for an individual to consider their circumstances and
what can be done to reduce the impact of the tax relief
restriction.
A 40% taxpayer has a buy to let property and
receives £10,000 of rental income and pays £8,000
of mortgage interest.
Currently the rental income is taxed at 40% and the
interest is given tax relief of 40%, making the tax
charge £800 in this example.
After April 2020, the tax charge will increase to
£2,400 - it will have trebled!
The changes will only impact those individuals paying tax at the higher rates of tax and some potential tax saving
opportunities include changing the ownership of the property, particularly where a spouse pays tax at a lower rate or
reducing the amount of income chargeable to higher rate tax by paying pension contributions or making charitable
donations. For those with a larger property portfolio, transferring the properties to a limited company could prove an
effective tax strategy although other tax issues such as capital gains tax and stamp duty land tax need to be
considered.
It is important that anyone in this position seeks advice. The advice may pay for itself multiple times over, so people
should speak to us now.
To discuss these changes and how they impact your property business or for further advice and support
contact our tax team on 01325 349700
Alan Moore - [email protected]
Darlington Office
01325 349700
[email protected]
www.cliveowen.com
York Office
01904 784400
[email protected]
Lee Watson - [email protected]
Durham Office
0191 3842244
[email protected]