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Tax Assault on Buy to let Landlords

by | Dec 16, 2015 | Advice, Clients

With recent tax relief changes announced by the Government, we asked Michael Michaelides at EAGK Chartered Accountants to summarise the changes and what they could mean for landlords.

Buy to let landlords are increasingly finding themselves bearing the brunt of HM Government’s attempt to claw back tax reliefs. From 2017 landlords will lose higher rate tax relief on qualifying loan interest, whilst still paying tax at their highest rate on the profits generated from their rents, which could lead to property owners having to pay HMRC tax out of money they don’t have – as many landlords have developed their property portfolio with interest-only mortgages in order to maximise profits and reinvest these profits into more property.

By way of example –  a 40% tax paying landlord with  net rents (after repairs and other expenses) of £50,000, and loan interest of £40,000, would under the old rules pay £4,000 in tax on the rental profit. Under the new rules that tax liability increases to £12,000 – a threefold increase in tax!

This situation can be mitigated by acting now, before the changes are due to fall into place. We are able to provide solutions to the financing and arrangement of your property income that will reduce your exposure to tax, and preserve your claims to expenditure. Please call us as a matter of priority for an consultation on how we can protect your property investment.

If you would like a no obligation initial free consultation contact Michael Michaelides at EAGK Chartered Accountants by email  michael@eagk.com or on 02084455500