Of the 385 people who took part, nearly three quarters revealed they found buy-to-let taxes confusing. The report also found landlords were dissatisfied with the lack of communication regarding new tax changes and the current buy-to-let process.
This is not the only study to reach this conclusion. In April 2017, a survey by Upad found one in five landlords were unsure of the latest tax changes. Indeed, almost half (47%) had no idea how much tax they would be paying once the mortgage interest rate changes in 2020.
It pays to be aware of the latest changes. Up to £30,000 can now be fined for housing offences, including overcrowded properties and not having an HMO license. Therefore, Vincent Burch have compiled a list of legislation worth getting your head around:
From April 2017, tax relief interest on buy-to-let mortgage payments will be gradually cut back. As a result, there will be higher tax bills, even if your rental income remains static. Instead of the full 100%, landlords can now offset just 75% of their mortgage interest payments. By 2020, this tax relief will be entirely discontinued, meaning landlords will be unable to offset payments.
Once the mortgage interest tax is discontinued, it will be replaced by a 20% tax credit. Therefore, you can offset 20% of your mortgage interest against tax, which will result in substantially more tax than your current situation.
If you are a landlord, you cannot automatically deduct 10% of your rental profits as wear and tear. Instead, you can only claim tax relief on sustained costs; for example, a new wardrobe or sofa. It is also important to note that all receipts MUST be kept!
If you have any questions regarding these changes, or would like to find out more information, please get in contact with the Vincent Burch team. Andrew Bowls is our head of Buy-To-Let Mortgages and will be happy to answer any of your questions. Please email him on [email protected] or give us a call on 01603 340 644.