Landlords: Is your Tax on the Up from April 2017?
From 6 April 2017 the relief that Landlords receive for mortgage and loan interest on residential lettings will be restricted. It marks a big change for Landlords as it is estimated that one in five will be affected by the policy.
Under the new rules, by 2020/21, finance costs will no longer be deducted from the rental income received (thus giving relief at whatever rate of tax you pay); instead they will be subject to basic rate relief, currently 20%.
The changes will be brought in gradually so that the following proportion of interest costs will be relieved in the normal way in the respective tax years.
The balance of costs for each year will be relieved at basic rate.
This change does not just affect higher rate taxpayers. Some people may find that, even though they are currently a basic rate taxpayer, when the finance costs are no longer being deducted in calculating their net rent, they may be pushed into higher rate tax. And relief is only available at basic rate.
HMRC announced this change in 2015 in order to give Landlords time to prepare for the impact. If you haven’t done this already then there’s no time like the present (meaning… act NOW!).
Contact us if you would like to discuss your situation with one of the Green & Co team.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.