If you are a buy to let property owner of a single or or 50 or more properties, you need to know about the tax changes that have recently started to take effect and those which will contiue to impact upon your affairs over the coming years.
For periods before 6 April 2017, all the interest and finance charges relating to funding for a residential property business could be deducted in full from the rental income.
From 2017/18, the financial costs which may be deducted from residential property income by individual landlords are restricted, download our free buy to let property publication to find out more.
The restriction for deduction of finance charges only applies to landlords who let residential property and pay income tax on those profits. It does not apply if the property is commercially let as furnished holiday accommodation (FHL), or the landlord is a company.
To avoid this restriction, the property business could be restructured. Download our free buy to let property publication to find out more.
Letting through a company
When you let property through your own company, the profits that company generates will be subject to corporation tax at 19%. When you pay funds out of the company to yourself as a salary, or as a dividend, there will be further tax and possibly national insurance contributions (NICs) to pay.
The first £5,000 of dividends you receive in the tax year is taxed at 0%. This allowance applies in addition to your personal allowance of £11,500. The exact amount of tax payable on funds you extract from your company will depend on the level of other income you receive in the same tax year.
Most landlords hold and let out their properties for the medium to long term, as a passive investor.
If you intend to turn over your properties more frequently, HMRC can treat your property business as a trade, rather than as a property investment business. To find out more download our free buy to let property publication.
Please contact us to discuss any property-related tax issues on 020 7330 0000