440,000 LANDLORDS TO BE FORCED UP A TAX BRACKET FROM APRIL 2017
More than four hundred-thousand landlords (22 per cent)* who pay the basic rate of tax will be forced into a higher tax bracket from April next year (2017) as planned changes to landlord taxation come in to force.
The changes, once fully phased in by 2021, will mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
Currently, mortgage interest payments are one of a number of expenses that landlords can deduct as a business cost, including insurance premiums, letting agent fees, and maintenance and property repair costs.
However, while 440,000 basic-rate tax payers will be forced into a higher bracket, all landlords could be at risk of seeing their tax liability increase regardless of their existing rate of tax, with landlords in Central London (31 per cent), the East of England (30 per cent), and the West Midlands (28 per cent) particularly hit. A full regional breakdown can be seen below.
The amount by which landlords will be affected will depend on their personal circumstances, including whether or not they generate income from any other sources.
Landlords’ tax liability will increase depending on their existing annual mortgage interest payments, which are broken down by portfolio size below**.
- Single property – £3,600
- 2-3 properties – £8,600
- 4-5 properties- £16,300
- 5-10 properties – £18,200
- 11-19 properties – £24,900
- 20+ properties – £38,000
The news comes as the National Landlord Association (NLA) met with Housing and Planning Minister Gavin Barwell to discuss the matter.
The NLA also hopes to meet Financial Secretary to the Treasury, Jane Ellison, in the near future after Chancellor Phillip Hammond responded to the association’s request to discuss the forthcoming changes, and last year’s stamp duty surcharge on addition property purchases.
The Financial Secretary is responsible for strategic oversight of the UK tax system including direct, indirect, business, property and personal taxation.
Richard Lambert, Chief Executive Officer at the NLA, said:
“When the Government announced these changes last year, it claimed they would only hit a small proportion of higher-rate tax payers. We now know that is complete tosh.
“The Government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home”.
From: Sam Haidar [email protected]