Confused about the abolishment of finance cost relief, the wear and tear allowance and perhaps even stamp duty? Don’t worry, we’ve created a free, downloadable guide to buy to let tax changes for UK landlords.
Over the past twenty years, there has been a boom in the UK buy to let market. Today, there are more than two million landlords owning 4.9 million properties - with a combined value of over £1 trillion. However, with recent and pending buy to let tax changes, it’s likely that the market is set to experience a dramatic shift.
Key changes:
- In the 2015 Autumn Statement, Chancellor George Osbourne announced an additional 3% Stamp Duty tax on purchases of second properties, such as holiday homes and buy to let investments. These changes came into effect on the 1st of April 2016.
- According to the government, the tax receipts will help to double the affordable housing budget and help first-time buyers break into the property market. Collectively, these efforts form part of the government’s commitment to supporting home ownership.
- On the 1st of April 2016, the Wear and Tear Allowance was abolished and was replaced by the Replacement Furniture Relief. Landlords who own and operate fully furnished properties could previously claim an annual deduction equating to 10% of their rental income. The relief aimed to compensate landlords for the replacement of furnishings and general wear and tear, even if no purchases were made throughout the year.
- From the 1st of April 2017, higher-rate taxpayers were no longer able to offset all of their mortgage interest against rental income due to the abolishment of the Finance Cost Relief. Though the reduction in relief is being phased in gradually, it will be in full force by 2020. Currently, landlords can only offset 75% of their mortgage interest against their profits with the remainder available at the basic rate of tax reduction. This will fall to 50% in 2018, 25% in 2019 and 0% in 2020, at which point all financing costs incurred by a landlord will be given as basic rate tax reduction (20%).
Once landlords have had the time to digest these changes, they can turn their attention to adjusting for the shifts they may face. There are a few ways in which landlords may be able to minimize the impact of these changes. In the Ebook, we walk you through 5 potential solutions which may help you adjust your finances accordingly.
Download our free guide to buy to let tax changes and learn about potential solutions!
Disclaimer and Legals
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