30 Dec 30.12.2016 Tax relief changes
30.12.2016 Tax relief changes
Landlords may pay more tax in the future due to announced in 2015 changes to tax relief on rental income from residential properties. If you have a Buy to Let mortgage, it is important for you to understand these changes and how they may affect you. The changes will come into effect gradually from 6 April 2016 to 6 April 2020. We’ve included below some information on these changes, for more details please visit HMRC website. At the moment, landlords can claim tax relief on finance costs such as mortgage interest payments, so they can offset the full amount of interest against their rental income when they calculate tax on profits. The new rules will mean that tax relief can only be claimed at the basic rate (20%).This means that all rental income will be considered part of gross income and you will need to include it on your tax return. This may increase the tax rate you need to pay, but you should consider:
– whether you’ll move from basic rate to a higher rate of tax
– if any of your entitlements to benefits (such as Child Benefit or tax relief on pension contributions) will be affected.