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HMRC’s crackdown on buy-to-let landlords

HMRC’s crackdown on buy-to-let landlords

Thousands of buy-to-let landlords will see changes to their tax liabilities after HM Revenue and Customs announces crackdowns on mortgage interest tax relief. Leading firm of Chartered Accountants, Newby Castleman is urging landlords to be aware of the new rules and understand the effects it will have on their tax bills.

In the summer Budget, it was announced that plans to restrict relief on finance costs for buy-to-let landlords on residential properties will be reduced to the basic rate of income tax.

This change will be phased in over a four year period from April 2017. Currently, landlords can claim tax relief on monthly interest repayments at the top level of tax they pay.  By April 2020 it will be down to 20 per cent.

It was also announced that from April 2016, those landlords who let out furnished properties will also see new tax relief systems in place.

At present landlords are allowed to deduct a range of expenses on top of mortgage interest costs, before they have to pay tax on their rental income. These expenses include maintenance and repairs, cleaning and gardening, utility bills etc.

Landlords renting out fully furnished properties have also had a special deduction equal to 10 per cent of rent given when claiming for wear and tear costs. But with the first changes taking effect from April 2016, the 10 per cent special deduction will be abolished and landlords will only be allowed to deduct costs that they actually incur, i.e. when they replace furniture and white goods etc.

Ian Fawcett, Tax Partner at Newby Castleman, said:

“At the moment, some professional landlords get tax relief at 40 to 45 per cent, but with the changes coming into effect the tax relief will be restricted to 20 per cent for all landlords."

"The changes could severely dent landlords’ rental profits therefore we are urging them to consider the new rules and to use the services of an accountant to discuss any queries they may have.”

If you require advice on any of the above, or help with any tax matters, please contact Ian Fawcett on 0116 254 9262 or you can email him at irf@newbyc.co.uk.

Newby Castleman is one of the region’s leading independent accountancy practices offering a range of specialist financial services, business and tax advice for individuals and businesses. Its head office can be found on Regent Road, Leicester and a branch office is located in Forest Road, Loughborough. To find out more about its full portfolio of services, download the free Newby Castleman app from The App Store or Google Play, telephone the Leicester branch on 0116 254 9262, the Loughborough branch on 01509 263500 or visit the website at www.newbycastleman.co.uk


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