Tax changes

Tax change introduction

The Government has introduced a number of tax changes which will directly impact on Landlords in the coming years

  • From April 2016, the wear and tear allowance Landlords can claim, will be replaced.
  • From 2017, tax relief on residential property costs will be fixed at 20%, regardless of whether they are a higher rate tax payer or not.

This means Landlords will not be able to deduct ALL their financial costs from their properties in order to reach a profit figure. They will instead receive a reduction in their income tax liability at the basic rate.

The changes will be phased in over the next five years:

  • Year One  - 2016/2017 No change in the way finance costs are deducted from the rental profits.
  • Year Two - 2017/2018 75% of finance costs can be deducted and the other 25% will be given as a basic rate tax deduction.
  • Year Three - 2018/2019 50% of finance costs can be deducted and the other 50% will be given as a basic rate tax deduction
  • Year Four - 2019/2020 25% of finance costs can be deducted and the other 75% will be given as a basic rate tax deduction
  • Year Five - 2020/2021 ALL finance costs given as a basic rate tax reduction.

Excess finance costs could be carried forward to following years.