Tax Changes for Landlords

It is essential for landlords to keep up to date and understand the frequently changing regulations. We take a look at some important tax changes for anyone buying or owning a buy-to-let property in the UK that will be taking effect from April 2016 and beyond.

Stamp Duty Land Tax (SDLT) increase
• A 3% surcharge on SDLT for second homes and buy-to-let purchases was announced in the Autumn Statement.
• The surcharge will be effective from 1st April 2016.
• Second home/buy-to-let purchasers who exchanged contracts before 25th November 2015 are currently believed to not have to pay the higher SDLT rate even if completion takes place after 1st April 2016.
• For purchases by a parent as co-owner with their offspring for mortgage purposes, a Treasury spokesperson advises that “if the parent already owns a residential property it is likely that the higher stamp duty charge will apply from 1st April 2016, but the details will depend on the outcome of the upcoming consultation”.

Consultation closed on 1st February and the final details of the tax changes are expected to be announced in the Spring Budget 16th March.

Wear and tear allowance offset
• The annual 10% ‘wear and tear’ offset allowance for furnished properties will be scrapped from April 2016.
• You will only be able to claim for ‘wear and tear’ costs actually incurred on replacing furnishings when calculating taxable profits. You will need to provide itemised receipts that show the replacement goods you’ve purchased or repairs carried out.

Buy-to-let mortgage tax relief
• Buy-to-let mortgage tax relief will be limited to the 20% basic rate, as per the Summer Budget 2015 announcement
• The change will be phased in gradually over four years, starting from April 2017

We recommend landlords who are higher tax payers to take professional tax advice as soon as possible to ensure that the allowances to maintain your income are maximised.
For further information on income tax for landlords and the new stamp duty tax surcharge contact