INVESTMENT PROPERTY & SECOND HOMES
As a landlord, it's important to be aware of any changes in legislation which is likely to erode taxable income.
See below for current changes and how we can help alleviate the impact,
contact us or download some of our useful information documents below.
Tax relief on finance costs will be restricted to basic rate tax from 2020. Historically, relief on interest payments had been integral to the growth of the buy-to-let market but now landlords with leveraged properties will face an increased tax burden (PDF). The Government is expected to net an additional £665m from landlords in 2020 alone.
The basic rate of capital gains was cut from 18% to 10% and the higher rate, from 28% to 20% in April 2016. However, the gains made on residential property sales are not eligible for these new lower rates. Instead, the Chancellor has maintained the existing rates, equal to an 8% surcharge - so those with buy-to-let portfolios and second homes will pay more.
WHAT DOES THIS MEAN?
From April 2016, the 'wear and tear allowance' was scrapped, the tax relief now only applies to the costs incurred while doing so.
From April 2017, landlords are no longer be able to deduct (all) finance costs from their property income to arrive at their property profits, phased in until 2020 - reducing by 25% pa.
Worst affected will be the highly leveraged portfolios where equity has been released to reinvest.
From April 2019, a 3% additional SDLT applies to the full purchase price on buy-to-let properties and second homes for both personal and corporate holdings.
We can achieve significant savings by transferring the properties to a corporate structure and apply various tax reliefs so as not to trigger either the Capital Gain or Stamp Duty Land Tax.
Once within the corporate structure you will be able to leverage the properties and obtain a full tax deduction on the loan interest paid.
From April 2019, any Capital Gains Tax will be due within 30 days after the disposal, however, companies retain a 9 month deadline for any tax due.
Inheritance Tax can also be dealt with in a number of ways to protect assets for the next generation and we can also structure any bespoke borrowing opportunities. Download our guide (PDF) for more information or contact us for a free consultation.