Not sure on something?
From April 2017, the new rules regarding tax relief on finance costs for landlords are being phased in over 4 years. The amount of Income Tax relief landlords are eligible to receive on residential property finance costs will be restricted to the basic rate of tax. The term “finance costs” refers to mortgage and loan interest, overdraft fees/interest and any other incidental costs for getting or repaying mortgages and loans. Tax relief relating to repairs and renewals for the property will not be affected by these changes.
Who will these changes affect?
All residential landlords with finance costs will be affected, but not all will have more tax to pay. This includes:
You will not be affected by the changes and will continue to receive relief for finance costs in the usual way if:
The restriction will be gradually phased in over the next 4 years, in the transitional period you will still be able to use some of your financial costs to work out your taxable profit, the rest of the financial costs will be replaced with a basic rate tax reduction. The breakdown of this is below:
|Tax year||Percentage of finance costs which is tax deductible||Percentage of basic rate tax reduction|
As the new rule changes the way taxable profits are calculated this could have an impact on anything that is based on your taxable income, including High Income Child Benefit Charges.
If you’re not sure how these changes will affect your personal tax affairs, please contact us here at Crowther Chartered Accountants! We provide friendly tax advice along with a full range of accountancy services.