According to Warren Lewis, who writes very interesting property articles for the property industry, well over 400,000 landlords will find themselves forced into a higher tax bracket thanks to the changes in landlord taxation. This could have a devastating effect on the rental market and he has basically explained the situation and highlighted the options below. Please read.
22% of landlords who pay the basic rate of tax will be forced into a higher tax bracket from April 2017 as planned changes to landlord taxation come in to force.
According to the National Landlord Association the changes, once fully phased in by 2021, will mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.
Currently, mortgage interest payments are one of a number of expenses that landlords can deduct as a business cost, including insurance premiums, letting agent fees, and maintenance and property repair costs.
However, while 440,000 basic-rate tax payers will be forced into a higher bracket, all landlords could be at risk of seeing their tax liability increase regardless of their existing rate of tax, with landlords in Central London (31%), the East of England (30%), and the West Midlands (28%) particularly hit.
The amount by which landlords will be affected will depend on their personal circumstances, including whether or not they generate income from any other sources.
Richard Lambert, Chief Executive Officer at the NLA, said: “When the Government announced these changes last year, it claimed they would only hit a small proportion of higher-rate tax payers. We now know that is complete tosh.
“The Government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home”.
Watch this space!