18 Jan 18.01.2016 Buy to let tax revamp
18.01.2016 Buy to let tax revamp
There have been several shake ups announced in the Buy to Let market recently that affect both landlords and tenants.
Landlords can currently deduct mortgage interest from their rental income before calculating how much tax they should pay.
From April 2017, tax relief on Buy to Let mortgage interest will gradually be reduced. The restrictions will be phased in over four years, resulting in tax relief only being available at the basic rate of income tax (currently 20%) from April 2020.
Landlords can also claim 10% of their rent as tax relief for wear and tear. From April 2016 the allowance is being replaced by a system that only allows them to claim tax relief when they replace furnishings.
If you are in the Buy to Let market, you may wantto consider setting up a company to take ownershipof the properties, as homes owned within a company structure are not affected by these changes. However, the transfer will be treated as a market sale meaning it may incur capital gains tax and stamp duty.
The Deregulation Bill looks to prevent ‘revenge eviction’ by prohibiting landlords from serving a no-fault ‘section 21’ eviction notice for six months following the issueof a local authority improvement notice.
The bill also requires all rented properties to havea working smoke alarm and, in some cases, carbon monoxide detectors. Failure to meet these requirements can result in a fine of up to £5,000.
Right to rent
From 1 February 2016 all landlords will need to check their tenants have the right to rent a property in the UK. Those who let property to someone without the right to rent can be fined up to £3,000.
Buy to Let mortgages are not regulated by the Financial Conduct Authority.