About 1.4 million landlords may not be aware of the new changes made to the Finance Act (Section 24), and its impact in reducing the profitability of rental income from property owned in their own names. This applies especially to higher income tax payers. The following article gives a brief overview of the impact for landlords, and what you can do about it.
Landlords who own property in their own name will make less profit
The Section 24 of the Finance Act 2015 will mean that UK landlords who own property in their own names may gradually make less profit from their properties (after tax), and in some cases some landlords may be pushed into a higher tax bracket. As such, some landlords might end up incurring a loss on their properties.
Before the passing of this act UK landlords were able to deduct full costs of mortgage interest payments on their rental properties before they paid any tax. However, from April 2017 mortgage costs, loan and overdraft interest costs will be gradually reduced over a four year period, when calculating taxable rental income.
Implementation of the tax
The act divides the changes into 4 stages, which will be implemented gradually over the span of 4 years, are as follows:
Who will be affected?
Section 24 will affect:
Section 24 does not affect:
How can Prosper Living help landlords find a solution?
In the face of reduced profits and increased regulation, now may be a great time to sell your property or portfolio, so you can retire and relax now.
If you are considering selling your portfolio, we can help you to simplify the sales process on a multi-unit sale, maximize tax efficiencies and minimise fees.
We look to find bespoke solutions, to help you achieve the outcome you need.
If you are interested to explore this further, please email Prosper Living here.
I am not an Independent Financial Advisor (IFA), nor do I offer legal, tax or accounting advice, but I work with professional advisors to find suitable solutions. Please use your own professional advisors to explore and understand your options. The above article(s) represents my point of view and cannot be relied upon for decision making without separate professional advice.
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