Since April 2017, the amount of tax relief landlords can claim on finance costs has been reducing. Are you up to date on the changes?
In an attempt to assist first-time buyers, the government introduced a number of changes to make the buy-to-let market less attractive to landlords. One of these was the introduction of a 3% stamp duty surcharge on additional properties, and another was the restriction of finance cost relief.
From 6 April 2020, no finance costs will be allowed as a gross deduction. This means landlords will declare their rental income, pay income tax on the full amount, then claim back 20% of their mortgage interest costs as credit.
If you fall into the higher tax brackets of 40% and 45%, then you could see an increase in your tax bill. Therefore, it would be prudent for all landlords to understand their exposure and consider tax planning steps to maximise profitability.
If you would like to discuss tax planning opportunities, SDLT (Stamp Duty Land Tax)/CGT (Capital Gains Tax) relief, call our Private Client Team on 01788 539000.