Being a landlord is not always plain sailing – on top of all the things on your to-do list, there are frequently changing regulations to comply with too. However, tempting it might be to slip checking Government websites to the bottom of your list, we always advise landlords to keep on top of all upcoming regulations, to avoid the unnecessary hassle of last-minute compliance arrangements.
Here we take a brief look at some of the important tax changes due to take effect from April 2016 and beyond:
Stamp Duty Land Tax (SDLT) increase:
- A 3% surcharge on SDLT for second homes and buy-to-let purchases was announced in the Autumn Statement
- The surcharge will be effective from 1st April 2016
- Second home/buy-to-let purchasers who exchanged contracts before 25th November 2015 are currently believed to not have to pay the higher SDLT rate even if completion takes place after 1st April 2016
- For purchases by a parent as co-owner with their offspring for mortgage purposes, a Treasury spokesperson advises that “if the parent already owns a residential property it is likely that the higher stamp duty charge will apply from 1st April 2016, but the details will depend on the outcome of the upcoming consultation”
Consultation closed on 1st February and the final details of the tax changes are expected in the Spring Budget announcement due 16th March.
Wear and tear allowance offset:
- The annual 10% wear and tear offset allowance for furnished properties will be scrapped from April 2016
- The cost of the new items can be claimed on a renewals basis as they are purchased
Buy-to-let mortgage tax relief:
- Buy-to-let mortgage tax relief will be limited to the 20% basic rate, as per the Summer Budget 2015 announcement
- The change will be phased in gradually over four years, starting from April 2017
Whilst this change may seem far away, our recommendation for landlords who are higher tax payers is to take a professional tax advice as soon as possible to ensure that the allowances to maintain your income are maximized. With mortgage interest rates currently being at a historic low, it might also be a good time to consider using any finance that you may have in order to reduce your mortgage interest charges.
For further information on income tax for landlords and the new stamp duty tax surcharge contact www.gov.uk.