Residential property income - tax changes ahead
The details
The change will be phased in from 2017/18, with transitional rules until 2020/21. During the transitional years, the amount of the tax deduction from rents will reduce and the proportion of loan interest that will only qualify for basic rate tax relief will increase. In the transitional years landlords will be able to claim:
2017/18 - 75% of the interest against rents, 25% basic rate tax relief
2018/19 - 50% of the interest against rents, 50% basic rate tax relief
2019/20 - 25% of the interest against rents, 75% basic rate tax relief
Ownership through a company
This change will have no direct impact on those who own and let residential properties through a company: companies will continue to deduct loan interest as a business expense and get effective relief at up to 20%
Wear and tear allowance
The Government is consulting on a proposal to remove the established system of allowing a fixed annual deduction for wear and tear on soft furnishings and moveable furniture used in a furnished letting business (10% of the rents less costs normally paid by the tenant) from April 2016. For 2016/17 onwards, landlords would only be able to claim expenses actually incurred during the tax year
Rent a room relief
The annual amount that landlords can receive from letting a room in their own home before tax becomes payable is to be increased from £4,250 to £7,500 (£144 per week) from April 2016 onwards
- See more at: https://www.bdo.co.uk/en-gb/insights/tax/private-client/residential-property-income-tax-changes-ahead#sthash.m3Cgl3UW.dpuf
