Changes in Tax for Landlords

Over the past year there have been several changes in tax for landlords. Unfortunately none of them are in your favour if you rent out property. Here are the main headlines …
Relief for Mortgage Interest
This measure reduces the tax relief that is available on mortgage interest if you are a higher rate taxpayer. The deduction for interest is restricted to the basic rate. As this is usually the highest expense by far on letting a property this will substantially increase the tax liability on property income for higher rate taxpayers. Reporting this on your tax return has not been made straightforward either and we would be glad to help you get it right. The changes will be phased in over a four year period so there is at least some time to adjust.
Abolition of the Wear & Tear Allowance
Until this year, if you let a furnished property you could claim 10% of the gross rental incomeT as Wear & Tear Allowance instead of claiming relief for the cost of replacing fixtures and fittings. he last budget announced that Wear & Tear Relief is replaced from 6 April 2016 with a deduction for the actual costs you incur in maintaining the property. It is likely that this will disadvantage most landlords and result in youo paying more tax.
Increase in Stamp Duty
If you purchase a property to rent rather than as your main residence then you will now be paying an additional 3% on your Stamp Duty charge. That is simply an extra tax on letting a property,
And then there is the good news landlords can’t benefit from, namely the reduction of capital gains tax from 18% (28% for higher rate taxpayers) to 10%  (20% for higher rate taxpayers) … unless you are selling a property! Clearly the changes of tax for landlords are not going to make life any easier in future. Let us know if you would like further advice on how to respond to these changes.