The Government has said it expects one in five landlords to pay more tax but there are things you can consider. It may be worth contacting our CHW Accountants in Bolton to explore your options.
Until April, 2017, landlords were able to claim tax relief for finance costs on buy-to-let mortgage payments when they complete their tax return, allowing them to offset mortgage interest against rental income.
However, the phasing in of mortgage tax relief restrictions began on April 1, 2017, with full implementation by April, 2020. Property investors who previously deducted costs incurred from their payable tax will be able to claim tax relief on their finance costs at the basic rate of 20%, regardless of what income tax bracket they fall into.
Therefore, those in the higher and additional rate bands will pay more tax.
There are elements that landlords can consider. For example, if you are a higher rate taxpayer with a spouse who does not work, consider transferring a beneficial interest in the property so that rental income can be received by them. This allows them to maximise their tax-free personal allowance, and basic allowances, thereby reducing the total tax payable.
As limited companies are not affected by the changes to mortgage interest tax relief, landlords have increasingly been looking to incorporate. However, there can be significant tax implications such as Stamp Duty Land Tax and Capital Gains Tax and it is imperative that expert professional advice is sought before going down this route.
It is also worth reviewing mortgages on buy-to-let properties to ensure that rates are competitive.
If you’d like more information on this matter, please don’t hesitate to contact our Accountants in Bolton either via our online enquiry form on call us on 01204 534 031.
Want to find out how we can help you and your business? Get in touch today and let's have a chat.
11 November 2019
Even in this digital age some businesses remain heavily reliant on cash transactions. HMRC views these as high risk and as a result targets cash businesses with VAT enquiries, using special techniques to justify investigating them.
6 November 2019
The first big deadline for MTDfV is history and whilst there was a fairly high failure rate, it was not as bad as originally feared.
29 October 2019
BPR shelters the value of your business from the HMRC. The trouble is though, when you retire from your unincorporated business, the relief disappears immediately. CHW explain how you can preserve it.
22 October 2019
New rules will apply to employment termination payments from 6 April 2020 meaning that some settlements will be subject to NI in addition to tax. With this in mind, CHW look at how you can you improve the tax and NI efficiency of a termination settlement.
14 October 2019
You’ve engaged the services of a non-executive director (NED) who has experience in growing companies. The NED is freelance and has asked for her fees to be paid free of tax and NI. CHW explain whether that’s ok or if trouble with HMRC is on the horizon.