18th May 2017
If you are the landlord of a residential property which you let out, you need to be aware of changes in the tax relief on financing your property.
The changes are being phased in from April 1 2017 and mean that the tax relief available to landlords on these residential finance costs will be restricted to the basic rate of tax. These changes will apply to you if:
However, you will not be affected if you are part of either a UK resident or non-UK resident company or if you are renting your property as a furnished holiday let.
How will you be affected?
You will now need to calculate your ‘Adjusted Total Income’ which is your total taxable income, once any tax deductions or reliefs have been applied. This is likely to be complex, depending on your other sources of income, and the finance costs you may have for your residential letting business. Typically, the new relief restrictions will cover:
Loans that cover both residential and commercial properties will need to be accurately apportioned to ensure that tax relief is calculated properly.
What do you need to do?
If you fall into one of the categories of residential landlord to whom these new changes apply, you will need to talk to your accountant or tax adviser, to make sure that you are taking the right steps in terms of record-keeping and disclosing your finance costs. You may also need professional help to calculate your Adjusted Total Income so that you are paying tax at the right level.
To find out more about how this could affect your residential property letting activities, contact Wise & Co today.