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A few years ago Osborne (remember him?) had the hunch that property landlords were adding too much inflationary pressure to the UK housing market. So he put buy-to-let landlords in his sights and got to work reducing the income tax reliefs available to them. His reasoning was that, by levelling the playing field, people who want to buy their own home would be able to compete more effectively with buy-to-let landlords.

Whether that will be the case remains to be seen. But one thing’s for sure – his changes made a massive difference to Landlords across the UK.

From 6 April 2017, landlords (subject to income tax on their letting profits) gradually started losing the right to claim a deduction for finance costs. These costs are primarily, but not limited to, mortgage or loan interest payments. Instead, landlords can claim a tax credit based on 20% of the disallowed costs.

The reduction started in April 2017 and will be fully implemented by April 2020. So very soon now, landlords will be denied higher rate tax relief on mortgage interest and associated finance costs.

The changes also have a rather insidious side effect. Under certain circumstances, basic rate taxpayers are finding themselves promoted to the higher rate tax band, even though they enjoy no increase in rental profits. Those most at risk are landlords who have borrowed heavily to grow their property portfolios and have high levels of rental income matched by high levels of finance costs.

If your circumstances have the most unfavourable combination of rental income to finance costs, the effects on your income tax liabilities will be considerable.  Even with no change in your property business profits, you will be experiencing significant increases in taxation.

At THP we specialise in helping Landlords and have created a special section on our website which explains in detail the many ways that we can help them to save tax.

You can find this here.

If you are concerned that you may be affected, please get in touch with us today. We are happy to advise you how to structure your property portfolio in the most tax efficient manner.

Image source: Geograph.

Avatar for Jon Pryse-Jones
About Jon Pryse-Jones

Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

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