Recent tax changes designed to cool the buy-to-let market are starting to have an effect, with an increase number of landlords with significant property portfolios wishing reduce their property numbers, but owners are seriously concerned around potential liability of capital gains tax (CGT) are increasing. However, the CGT liability will crystallise on each property sale must be taken into account when contemplating whether it is best for landlords to downsize their portfolios.
Buy-to-Let landlords or Rental income must be aware that:
- Property Income Allowance: tax payers can claim the property allowance which came into effect last year, giving property owner £1,000 of tax relief on their rental income, provided they have few or no expenses. This new allowance can be particularly beneficial to joint owners – both parties are able to claim the allowance up to £1,000 each (not applicable to partnership business properties).
- Will be able to deduct 75% of finance cost from rental income in 2017/18 and use a 25% basic rate tax reduction. This become 50% finance cost deduction and 50% basic rate reduction in 2018/19 then 25%/75% before reaching 0% deduction of finance cost and 100% basic rate reduction in 2020/21.
- This restriction doesn’t apply to companies and furnished holiday lettings
- Rent–a-room relief threshold recently increased to £7,500 and will stay
- Buy-to-Let landlords are the latest to be targeted by HM Revenue and Customs’ crackdown on tax avoidance. The initiative could see up to 1 million landlords nationwide greeted by the taxman at their door in an effort to catch those who failed to declare income from property renting.
We assist property owners to calculate and help them to pay correct amount of tax from their Rental Property Income.