Landlords shifted into higher tax bracket in 2017
20th October 2016
More than 440,000 basic rate tax paying landlords could be moved into a higher tax bracket from April 2017, according to the National Landlords Association (NLA).
The government is to restrict the tax relief landlords receive on finance costs from residential property to the basic rate of tax from 6 April 2017.
The changes will be introduced gradually up to 2021. Currently, landlords are able to deduct finance costs received such as mortgage interest payments, letting agent fees and repair costs.
|Tax year||Percentage of costs deducted from profits||Percentage of costs available as a basic rate deduction|
Other factors could affect the degree to which individual landlords are affected by the changes, principally whether they generate income from other sources.
Landlord tax liability could increase depending on existing mortgage interest payments based on portfolio size:
- 1 property - £3,600
- 2-3 properties - £8,600
- 4-5 properties - £16,300
- 5-10 properties - £18,200
- 11-19 properties - £24,900
- 20+ properties - £38,000.
Richard Lambert, chief executive officer at the NLA, said:
“The government must look to amend these tax changes and minimise the impact on landlords and their tenants - something that could easily be achieved by applying the rules to only new loans written after April 2017.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home”.
Talk to us today about how these changes might affect your rental income.