Keeping you up to date on the latest accounting and tax issues

Landlords to see sizeable increase in taxable profits

By now, landlords up and down the country should be aware that on 6 April 2017 the Government began to roll out Section 24 of the new buy-to-let tax relief system, which will be phased in over a period of 4 years.

The changes mean that landlords, who were previously able to deduct the cost of mortgage interest from rental income when calculating taxable profits, will instead pay tax on their turnover net of expenses such as repairs and insurance. By 2020, 100 per cent of buy-to-let finance costs will be restricted to the basic tax rate of 20 per cent.

This will affect landlords, nationwide, in a big way as tax liabilities increase and profits shrink. One online lettings agent Upad.co.uk revealed that its landlords will see, on average, a 13 per cent increase in their taxable profit between 2017/18 – 2018/19.

As tax liabilities increase, it is highly likely that landlords will increase rental charges to counter some of their losses. However, a key consideration when charging more is whether potential tenants will be willing to pay, particularly if there have been few improvements made to the property. It is vital that you  know your local rental market before making a decision like this.

We know that constant changes to property taxation are a real pain point regardless of whether you’re a seasoned landlord, or whether you’re only just looking to make a start on your portfolio. Despite this, enhancing your investment yield and improving your cash flow should not be a lost cause.

If you’re beginning to feel like all hope is lost, on a slippery slope to financial strain, then we might just be the fresh pair of eyes you need. We can help you identify the risks you may have overlooked, the solutions you just can’t see and, most importantly, new opportunities to maximise your investment.

To find out more about how these changes will affect you going forward, download our ‘Residential Property Letting – A Private Landlord’s Guide’ here.

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