Earlier this year George Osborne announced several changes to the buy to let taxation system which will start coming into effect as from 2016. There has been much criticism of this new scheme which among other factors will stop landlords from being able to claim back interest on buy-to-let loans as well as altering the way landlords can claim for damage and repair to their rental properties, plus much more complicated tax system for those landlords earning over a certain threshold.
Despite protests against the proposed changes- such as an on-line petition against the new tax system, signed by 14,000 people the government has made it clear that it will be going ahead with the proposed changes.
The financial secretary to the Treasury, David Gauke has written to the Residential Landlord’s association making it clear that the proposals are essential to establish a ‘fair tax system.’Gauke stated in his letter: 'By restricting cost relief to the basic rate of income tax, all finance costs incurred by individual landlords will be treated the same by the tax system.'
The RLA, in an earlier letter to Gauke, had made the point that the private rental sector should be treated like any other business for tax purposes.Gauke's response to this point includes this key statement: 'Landlords will continue to get full income tax relief on the costs incurred in letting out a property, such as letting agency fees and replacing furniture, as others do on the costs they incur in carrying out a trade. Finance costs are different as having a mortgage on a property also allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would without the mortgage. The government wants to rebalance relief for these finance costs and ensure that all individual landlords get finance cost relief at the same rate.'
He also insists that rents will not increase as a result of these proposed changes, as they will be phased in over the next four years.
If you are confused about how any of these proposed changes might affect your buy-to-let portfolio or perhaps you are looking at investing in a buy-to-let property why not pop into your local branch of Intercounty or give our team a call on 0844 8111 090*
*Calls cost 7 pence per minute plus your phone company’s access charge