Problems for landlords

THINKING OF BUYING A SECOND PROPERTY – Taxation Changes

If you are thinking of buying a second property, please ensure you consider the tax changes.

1.RESTRICTION OF TAX RELIEF ON INTEREST IN RESPECT OF RESIDENTIAL RENTAL PROPERTY

The amount of income tax relief that you can claim on loan/mortgage interest started to reduce from April 2017. By April 2020, interest will no longer be an allowable expense in computing rental profits, but rather will attract basic rate tax relief at 20%. In the years between 2017 and 2020 the change is gradually being phased in.

2. INCREASED STAMP DUTY LAND TAX ON ADDITIONAL PROPERTIES

With effect from 1 April 2016, if you purchased a second home or an additional residential rental property it will cost an extra 3% above the current SDLT rates. So for example a rental property that you are considering acquiring for £300,000 would have had a SDLT charge of £5,000 up to 31 March 2016, but if purchased now this would be £14,000!

3. THE NEW CAPITAL GAINS TAX “PAYMENT WINDOW”

It has been announced that with effect from 6 April 2019, if you dispose of a second home or residential rental property then you will have to calculate and pay any Capital Gains Tax due
within 30 days of the completion date.

If you would like any more information or have any questions regarding the above, please contact Ian Cooke (Director) at our Ledbury office.