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Tax changes for landlords

Tax changes for landlords.

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Tax changes for landlords

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  1. Tax changes for landlords The views provided in this presentation are for general information purposes only. Nothing in this presentation represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this presentation or any decision or other action that may be taken in reliance upon the information contained in this presentation. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  2. The main changes There have been several changes brought into effect recently that have the potential to increase the amount of tax paid by landlords. • Capping of tax relief on finance costs (including interest payments) over 4 year period starting 2017/18. • 10% wear and tear allowance to be removed from 6 April 2016 • Stamp duty for additional residential property to have a 3% premiumfrom 6 April 2016 • Annual Tax on Enveloped Properties For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  3. The basics • Currently for personally owned rental properties any resulting rental profits are subject to income tax at the individuals rate of tax. • Properties owned by companies resulting rental profits are subject to corporation tax, currently 20% but falling to 18% in 2020. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  4. Capping of tax relief • 2017/18: 75% of finance costs available, 25% restricted to basic rate tax deduction • 2018/19: 50% of finance costs available in full and 50% restricted to basic rate • 2019/20: 25% of finance costs available in full and 75% restricted to basic rate • 2020/21: all finance costs restricted to basic rate. Therefore those landlords who are highly leveraged and pay higher rate tax will be affected more through these changes. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  5. Common example A personally owned rental property by Mr A. Mr A has a job earning £60,000 per year (therefore a higher rate tax payer). He also has a rental property earning £30,000 in rent and pays £20,000 on an interest only mortgage. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  6. Extreme example Personally owned rental property by Mr A. Mr A has a job earning £200,000 per year. Rental property earning £40,000 in rent and paying £30,000 on an interest only mortgage. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  7. 10% wear and tear allowance 10% wear and tear allowance will be removed from 2016/17 • From 6 April 2016 wear and tear allowance will be abolished • This was an allowance of 10% of the gross rental income. • Allowed for furnished rental properties only. • Moving forwards you can only use the ‘renewals basis’. • The ‘renewals basis’ is currently allowed for both furnished and unfurnished properties. • Under the ‘renewals basis’ you can’t claim the cost of the original item only the renewal of an item. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  8. 10% wear and tear allowance continued • Therefore from 6 April 2016 there is tax relief for the cost of replacing furniture, furnishings, appliances and kitchenware provided for tenants. This includes: moveable furniture, televisions, fridges and freezers, carpets and flooring, curtains and blinds, linen and kitchen utensils. • This list is not exhaustive but gives an idea of the assets the wear and tear allowance covers. • This is a tax concession as from 6 April 2013 the replacement of white goods was not allowable. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  9. Annual Tax on Enveloped Properties • Properties owned by a company (or partnerships with a company as a member) have to pay an ‘Annual Tax on Enveloped Properties’. • Currently if the residential property value is greater than £1m you have to pay ATEP. • From 1 April 2016 for properties with a value greater than £500,000. • Value is at 1 April 2012 or the date of acquisition if a later date. For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

  10. In conclusion • There are numerous changes and every individual will be affected differently. • Even basic rate tax payers can be affected, as by 2020 the entire rental income will be assessable to income tax. • There is a lot of talk of moving or purchasing property through a limited company but beware of ATEP. • We offer a free 30 minute fact finding meeting – we do not charge for the time it takes us to understand your rental portfolio. • Contact us at enquiries@rwbca.co.uk or 0115 9648888 For further details please contact Neil Coupland at RWB Chartered Accountants on 0115 9648866 or neilc@rwbca.co.uk

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