We are already in the new tax year but with tax constantly changing it can rather confusing for landlords. Unfortunately 2018 is no exception, with there being no let up in headlines announcing tax changes for landlords.
In recent years, landlords have had bitter pills to swallow in terms of tax changes. This can undermine buy-to-let property portfolios making them more complicated to administer and, in many cases, less profitable.
It can be quite a challenge to keep up to date with all the latest changes for landlords across the UK. Here is a brief guide on the changes to the tax year 2018-19:
- Capital gains tax rates – there has been an increase in capital gains tax allowances to £11,700 for 2018-19. This is good news although there are higher capital gains tax profits above that allow for buy-to-let investors or those with a second home. The rate for selling a second property is 18% for basic-rate tax payers and 28% for additional-rate tax payers.
- Restrictions on mortgage interest relief – until just recently landlords were able to offset mortgage interest payments against any rental income. Unfortunately, this tax relief is being phased out. It was reduced in 2017 to 75% and faces a further reduction to 50% for the 2018-19 tax year. It’s worth bearing in mind that the phased approach is likely to knock many landlords into the higher-rate taxpayer bracket. Checking where you stand now could help avoid any nasty shocks when it comes to sorting out your buy-to-let landlord tax returns.
- New energy efficiency measures – which came into effect on the 1st April 2018 new energy efficiency measure regulations are in place. You will need any new tenancies or new contracts to carry at least an “E” rating on the Energy Performance Certificate. This regulation is set to be rolled out across all tenancies in the next two years. Non-compliance by landlords can see fines of up to £5,000.
As a landlord, you’re probably tired of being in the political spotlight, but with more and more people renting, expect tax changes to continue. There has even been talk of a new Ombudsman service which could deliver binding resolutions to any owner/tenant dispute.
If you’re concerned or worried in any way about tax changes which will affect your buy-to-let investment, get in touch and we will be more than happy to help.