In the government’s aim to slow the growing investor’s share of the residential property market, over the last few years they have introduced additional stamp duty at 3% for home owners buying second homes and from April 2017 landlords with mortgages may pay more income tax too.
Prior to April 2017 landlords could take full deduction for any interest and finance costs paid when calculating their taxable rental profits? Under the new rules the full deduction of interest is no longer allowed but a maximum tax reducer equal to 20% of the finance cost is deducted when calculating the tax payable.
If you are a basic rate tax payer after including your newly calculated property income it is unlikely that you will see much difference to your tax bill.
People who will be mainly effected by this will be landlords with multiple properties that are mortgaged, earners that are close to the ceiling of the basic rate band or higher or additional rate tax payers. The new rules may push some clients into higher rates of tax and those already paying tax at 40% or 45% will only get tax relief at 20%.
