1. Landlord Tax
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2. Mortgage Interest Relief Restriction
Finance costs no longer deductible in arriving at the net rents.
Relief is given via a tax reducer, which is deducted from the tax liability, at 20% of finance costs.
Will not only affect higher rate taxpayers.
Does not apply to companies or furnished holiday lettings.

3. The Phasing Out Period
Current tax year: the deduction from property is restricted to 75% of finance costs, with the remaining 25% available as a basic rate tax reduction 2018 – 2019: 50% finance costs deduction and 50% subject to a basic rate tax reduction 2019 – 2020: 25% finance costs deduction and 75% subject to a basic rate tax reduction 2020 – 2021: all financing costs incurred by a landlord will be subject to a basic rate tax reduction

4. The Phasing Out Period EXAMPLE:
Jane’s mortgage interest on her buy to let during 2017/18 = £3,000
75 % allowable deduction = £2,250 +
a reduction in her income tax liability of £150 (£750 x 20%)

5. Basic Rate Deduction
The basic rate tax reduction on the portion of finance costs not deducted in calculating the profit will be calculated as 20% of the lower of the:
the remaining finance costs (as seen)
profits of the property business in the tax year
total income (excluding savings income and dividend income) that exceeds the personal allowance and blind person’s allowance in the tax year
*any excess finance costs may be carried forward to following years if the tax reduction has been limited to 20% of the profits of the property business in the tax year.

6. Comparison Rental profits of £70,000, mortgage interest of £25,000
2015/16
(assumed rates at 2020/21 - PA of £12,500 and BR band £37,500):
Taxable rents of £45,000 (within basic rate tax)
Tax due £6,600
New regime (2020/21):
Taxable rents of £70,000
Tax of £15,600
Tax reducer - £5, %)
Tax due: £10,600
Also consider:
Income of £60,000 results in claw back of all child benefit received
Income in excess of £100,000 – claw back of personal allowance begins

7. Income Tax Forecaster What is your plan for the future?
How will these changes affect you?
Green & Co Income Tax Forecaster

8. Rental Property in a Limited Company
Why do this:
Control ownership and how much income you withdraw.
Children or grandchildren shareholders of the company.
More retained profits for next purchase.
Corporation tax at 19% to reduce to 17% (15%?).

9. Rental Property in a Limited Company
However:
CGT and Stamp duty land tax on transfer.
ATED – annual tax change on enveloped dwellings.
Difficulties obtaining mortgage.
Legal fees.
Double tax charge on extraction of profits - CT on profits and IT on dividends.
Elisabeth Ramsey – qualifying business for incorporation relief.

10. Capital Gains Tax
Residential Property
Other Assets
Basic Rate
18%
10%
Higher Rate
28%
20%
Proposed changes to payment deadlines on sale of residential properties.
CGT currently payable around 10 to 22 months after transaction, however this is to be cut to 30 days after the transaction.

11. Private Residence Relief (PRR)
Capital Gains Tax
Private Residence Relief (PRR)
Tax relief when you sell a property that you have occupied as your main residence.
Capital gains tax is reduced by principle private residence relief.
Relief also given for deemed occupation of 18 months (was 36 months).
PPR election.
Lettings relief - up to £40,000 per person.

12. Tax Tips Split investments with spouse
Utilise basic rate bands if lower earner
Deed of Trust Beneficial Ownership, Form 17
Pension contributions and gift aid – increase BR band and preserve personal allowance

13. Thank you for your attention.
Any questions?
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