There have been some recent tax changes aimed at the residential property investment sector:
- LBTT additional dwelling surcharge,
- changes on the ability to offset mortgage costs against income,
- the end of 10% fair wear and tear allowance,
- making tax digital.
As I hope everyone is now aware there have been some recent tax changes aimed at the residential property investment sector. Specifically, the LBTT additional dwelling surcharge, changes on the ability to offset mortgage costs against income, the end of 10% fair wear and tear allowance and finally making tax digital.
Perhaps the biggest impact will be the reduction in a landlord’s ability to offset mortgage interest against tax. Landlords will see this benefit cut and eventually replaced by a 20 per cent tax credit. This process is being phased in over the course of the next few years and will be fully applied in the year 2020. When the changes come in, tax relief will be a flat rate of 20 per cent so Landlords who pay basic rate tax should not see any change. However, those on higher incomes could find themselves losing much more in mortgage interest payments and will need to plan for this.
Less well known are the potential changes that will be required under Making Tax Digital which will require potentially any landlord with a rental income of over £10,000 PA to use specific software and submit quarterly reports from 6th April 2018. Landlords who let via an agency will be least affected, as the information required for quarterly submissions will already be available on a monthly (or quarterly) basis. The document says nothing about letting agents submitting direct to HMRC, but that can surely only be a matter of time.
As a proactive asset management company Glenham are always looking at ways of reacting to changes in the market place that could affect the returns our clients are able to generate from their investments. There are ways to mitigate against these changes and we have designed a 360 degrees review service with our trusted partners to help landlords find the best way to continue to benefit from the returns that investing in property offers. For information please contact Charlie Inness and he will be happy to chat over how the service operates.