By Angela Backhouse, Accountant at Hive Business
If you were a private landlord before 6 April 2017, you will know that any finance costs (i.e. mortgage interest) for your rental properties could be deducted from your rental income. From 6 April 2017, new rules were introduced which restrict the interest you can claim against your rental income.
These changes have gradually been phased in over a number of years and the tax relief available on finance costs has reduced with each tax year that passes. From April 2020 you won’t be able to claim any finance costs, they will only be available as a basic rate deduction, with conditions attached.
WHAT IS THE SOLUTION?
Be prepared for the increase in profits and tax!
Previously, your rental income may have been very low but with the rule changes, your taxable income will increase considerably over the next couple of years. If you weren’t already in the higher tax bracket, this could certainly tip you over that threshold. Landlords in the higher tax bracket could end up paying much more tax than before.
Most landlords with more than a couple casual properties are now thinking about alternative mechanisms to mitigate these changes, potentially incorporating or using pension structures to side-step the biggest issues.
We understand that trying to be as tax efficient as possible can quickly become a full-time job and that’s why we’re here to help. To discuss your specific circumstances please contact your account manager or get in touch on 01872 300232 or email [email protected].