Autumn Statement 2016 spells more tax for buy to let landlords
Following the recent government changes which came into effect in April 2016 there is already an additional 3% stamp duty on the entire cost of a second or subsequent residential property. Further changes are set to take place which are likely to cause more gloominess in the buy to let market.
From April 2017, a blanket tax relief which currently allows landlords to offset their mortgage interest costs against their income tax bills is set to be cut back continuously until 2021.
A blanket tax-free allowance for maintenance costs has also gone so landlords can only claim relief against work actually carried out.
If we take the example of a person who earns £80,000 rental profit less interest of £50,000 this leaves a net profit of £30,000 over the next 5 years their tax liability could rise to as much as follows:
This represents a potential increase in the effective tax rate from 2016/2017 of 12.66% to a staggering 35.66% in 2020/2021.
According to research by the Residential Letting Association, a quarter of buy-to-let investors will sell up and ship out if the proposed new tax changes are introduced and with the government showing no signs of making a u-turn on this policy, Landlord and investors alike will have to give serious thought and quickly as to how they intend to manage their increased tax burden.
For expert advice on commercial and residential property law, contact James Hodgson at our Halifax office on 01422 339 685.
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