One of the changes announced in the July summer budget was a restriction on tax relief for individuals who are buy-to-let landlords. Higher rate tax payers with property portfolios will start to see an increase in their tax bills from April 2017. The restriction on tax relief is being phased in over 4 years.
This is a major overhaul to the way in which property income is taxed for higher rate tax payers and the restriction of tax relief to the basic rate of tax on loan interest payments, including mortgage interest, could make the property portfolio unviable for some landlords, and will affect many of our clients.
Basic rate tax payers with buy-to-let properties won’t be affected, therefore if you are a basic rate tax payer, then you don’t need to worry.
The planned changes have brought mixed reaction in the press. Campaigners against the proposed changes have started an online petition to open up the proposed change to a parliamentary debate. They need 100,000 signatures before January 2016 to prompt a debate….http://saynotogeorge.co.uk/
It’s important to consider individual property portfolios on a case by case basis, as the tax effect will depend on the proportion of borrowings, and it’s important to do this before the 2017/18 tax year so that you are not stung with an increasing tax bill unexpectedly.
We can help you understand the impact for your property portfolio and this may trigger some planning discussions around where your portfolio is headed. Such planning might include a decision to dispose of certain properties to avoid extortionate tax rates as a % of net income. We may be able to identify other tax planning opportunities as well.
If you’d like to discuss the tax consequences of your property portfolio further then please call David or Lucy.