Ward Goodman, the Dorset based firm of Chartered Accountants and Independent Financial Advisers, has issued advice to residential landlords on the new rules regarding the taxation of residential buy-to-lets interest relief.
From 6 April 2020, when the new rules will be fully in place, interest paid will no longer be deductible as an expense when calculating taxable profit from rents. Instead, 20% of the interest will be deducted from the tax paid on the rents.
Bryn Holloway, Assistant Tax Manager, explained: “Some landlords have only been paying tax on their rents at the basic rate. For those that continue to do so, the new rules will make no difference and they will continue to get their basic rate tax relief on interest paid, as before. There is, however, a trap for the unwary. The changed calculation method will increase the net rental profit, so more landlords will pay higher rates of tax on their rents. Personal allowances, eligibility for child benefit, etc. may also be hit. The change is being phased in, with effect from 6 April 2017 so, even if this affects you, you probably won’t yet have noticed any difference in your tax bills. The first increases will hit tax payments due by 31 January 2019.
“Ward Goodman can give advice on what the new rules will mean for you, and any action you might consider taking to reduce the effects, so for more information call us on 01202 875 900 or email enquiries@wardgoodman.co.uk”