As a residential property landlord, you are liable for tax on your rental property income.
If you should decide to sell your investment property, the profit you make from the sale becomes subject to capital gains tax.
We advise landlords on how to minimise their tax liability whilst still ensuring that they meet their compliance obligations.
Your cash flow and tax position are likely to be affected by current changes to the way in which mortgage interest can be claimed by individual (as opposed to corporate) investors. For many landlords this will mean a reduction in the relief they receive and potentially higher tax bills.
If you are a residential property lettings landlord, the amount of interest relief you can claim on financial costs will gradually reduce between 6 April 2017 and 5 April 2020.
You will be affected by this change unless you are:
Letting a residential property that meets all the criteria for a furnished holiday let;
Are running a property business through a company, including a non-resident company subject to income tax.
Your finance costs include mortgage interest, interest on loans to buy furnishings, and fees incurred when you take out or repay mortgages or loans. No relief is available for capital repayments of a mortgage or loan.
If affected, the proportion of finance costs you can offset against rental income from your residential buy to let properties will gradually reduce from April 2017. By tax year 2020/21, you will only be able to claim a tax deduction for these costs at the basic rate of income tax in your annual tax computation.
From 6 April 2017 to 5 April 2020, a restriction will apply as follows:
2017/18 – 75% interest full deduction: 25% interest relieved at basic rate of income tax;
2018/19 – 50% interest full deduction: 50% interest relieved at basic rate of income tax;
2019/20 – 25% interest full deduction: 75% interest relieved at basic rate of income tax;
2020/21 – 100% interest relieved at basic rate of income tax.
These rules apply to ‘costs’ of a dwelling-related loan, so they extend to other deductions including the incidental costs of obtaining loan finance. A loan taken out to acquire a motor vehicle used in the management of a property business will also have a restriction on the allowable interest.
Our aim through comprehensive tax planning is to reduce the impact of the loss of relief and protect your cashflow.
Let Property Campaign
The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple way and take advantage of the best possible terms. If you’re a landlord and you have undisclosed income, you must tell HMRC about any unpaid tax now. You’ll then have 90 days to work out and pay what you owe.
The Let Property Campaign is an opportunity open to all residential property landlords with undisclosed taxes. This includes:
Those that have multiple properties;
Landlords with single rentals;
Specialist landlords with student or workforce rentals;
Renting out a room in your main home for more than the Rent a Room scheme threshold;
Those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK, as you may still be liable to UK taxes.
We can work out how much tax you owe, the penalties/interest chargeable and complete/submit the relevant HMRC disclosure form.