Belvoir Property Clinic launches

We have introduced our monthly Property Clinic, which promises to answer many of the questions we get asked in the office.This month we look at tax changes for Landlords.

If you have a question for our monthly Belvoir Property Clinic, please send to info@belvoirandover.com

Q Can you explain the tax changes that have been introduced for buy-to-let landlords as I am about to file my tax return

A This is a question we have been asked a lot at Belvoir, and it’s not an altogether simple one to answer.

The tax changes only apply to individual landlords who let property in the UK, those who let in a partnership or Trustees of a trust directly holding UK residential property. The new tax rules won’t apply to companies or landlords of furnished holiday lets.

In short, the main change being made under the new tax rules, is that landlords will no longer be able to fully claim tax relief on their mortgage interest payments and related finance costs.

Previously, landlords have been able to deduct a number of allowable expenses along with mortgage and other finance expenses from their rental income and just pay tax on the difference. Now however, tax relief on finance costs will be restricted to the basic rate of Income Tax with the restrictions being phased in gradually from 6 April 2017 until fully in place from 6 April 2020.

You’ll still be able to deduct some of your finance costs when you work out your taxable property profits during the transitional period. These deductions will be gradually withdrawn and replaced with a basic rate relief tax reduction.

Tax year	Percentage of finance costs deductible from rental income	Percentage of basic rate tax reduction
2017/18	75%	25%
2018/19	50%	50%
2019/20	25%	75%
2020/21	0%	100%

We would advise you to take some professional advice regarding how this will affect you based on your particular personal circumstances. There is also more information on the full impact of the changes and case studies published by HMRC which can be accessed on www.gov.uk

Non-UK Resident Landlords: Change to Capital Gains Tax

Further to a number of enquiries from our landlords regarding the introduction of the New Capital Gains Tax for Non UK Resident Landlords, we have researched this in depth and we have found the following salient points and a useful government link which you may find useful.

The new Capital Gains Tax came into force on the 6^th April 2015. Any sales of UK residential property made before that date, whether of a main residence or an investment home, owned directly by non-resident individuals should not incur a tax charge. However, from 6th April 2015, a charge to CGT will arise on non-UK residents who dispose of UK residential property. The charge will only be applicable to gains accruing after 6^th April 2015.

To summarise capital gains will apply: To non-UK resident individuals, trustees, certain closely-held fund structures and companies on the disposal of UK residential property, including rental properties, and Capital gains tax will be charged on the increase in value of the property from 6^th April 2015 onwards. Capital Gains Tax rates of 18% and 28% apply dependent your circumstances.

The general advice seems to be that Non-UK residents should get their properties valued now, even if they have no intention of selling. Failing to get a valuation could possibly mean paying more tax when the property is eventually sold.

If you do sell in the future, HMRC may query the amount of tax due on a sale and they will refer the matter to their District Valuer who will then determine the value as of the 6^th of April this year. The landlord can of course employ a surveyor at that point to do the same and they will negotiate with the District Valuer. This would obviously cost more than getting your property valued now.

For further information please view the following link https://www.gov.uk/capital-gains-tax-for-non-residents-uk-residential-property#