Renting out a property? There have been a few changes in the way you’re taxed recently and we at EasyRoommate want to make sure you’re all up to date!
So read on for three big landlord tax changes about to rock your world…
1. Wear and tear allowances
From April 2016, the way that the Government compensates landlords for their maintenance duties is set to change. Here’s how it used to work:
They would take the rent you earn – say £600pcm. Then they would subtract any amount of that that covered bills – let’s say you charged £600pcm (bills inc.) and the bills cost £100pcm, so the sum would become £500. Under the old rules, you could take 10% of this off your income and claim it as money used to mend wear and tear of the property, furnishings and fittings.
From now on however, things will be different. Landlord will now only be allowed to deduct the actual costs of mending wear and tear. I.e. if you spend £150 on a new table, you can only claim £150. Hold on to those receipts, guys…
2. Mortgage interest relief cap
The Government is phasing out their current policy of allowing landlords to claim additional rate tax allowance on money used to pay the interest on the mortgages of their rental properties. In 2015, a landlord could deduct all costs from their property income, which allowed them to receive up to 45% tax relief on their mortgage payments.
The phase out will be complete in 2020/21, when all costs incurred by a landlord will be given basic (20%) rate reduction, no matter what tax bracket the landlord is in.
3. Additional Stamp Duty Land Tax
Landlords who own more than one home will now pay an additional 3% of Stamp Duty Land Tax on top of the rate determined by the home’s value. This is one of many recent measures designed to make owning multiple homes less desirable – something thought crucial in easing the UK’s current housing crisis.
Lots to consider
These three changes join the raising of the rental income allowance for resident landlords which came into force in April in making 2016 a big year for landlord and rental reform.
Let us know how these changes will affect you! Tweet us at @EasyroommateUK now!