With significant changes to buy-to-let taxation in the pipeline, which landlords will be affected and what are their options? Adam Owens, senior tax consultant, OneE Group explores the impact of the measures announced by the Chancellor in the Summer Budget and considers the pros and cons of incorporation
A number of changes to the taxation of landlords were announced by the Chancellor, George Osborne in the Summer Budget. Many landlords are seriously concerned about the capping of tax relief on mortgage interest payments to the basic rate of tax, to be phased in from 2017 to 2020 as evidenced by an online petition with over 33,000 signatures at the time of writing.
Relief on interest payments has been an integral part of the growth in the buy-to-let market. Any restriction will have pronounced implications – an additional £665m in taxes is expected to be levied on landlords in 2020 alone.
Under the current rules, landlords are allowed to deduct the finance costs associated with let property against their rental receipts. With businesses and self-employed individuals able to claim business costs against tax, these changes to buy-to-let will put landlords in an exclusive, punitive tax regime of their own that is out of step with all other areas of tax.
