It’s the start of another tax year and following 2017’s announcements, there’s no let-up in headlines announcing tax changes for landlords. From mortgage interest relief to new energy efficiency measures, here’s our quick run-down of what’s been announced and what to keep an eye on.
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6 April 2018 marked the start of the new UK tax year, and with it the as-promised roll-out of further buy-to-let tax changes. What’s happened so far?
Buy-to-let tax changes explained
1. Restrictions on mortgage interest relief
Until recently, landlords were able to offset mortgage interest payments against rental income. The tax relief is being phased out however, and was reduced in 2017 to 75 per cent, and for the 2018-19 tax year the restriction is now at 50 per cent. If you’re on an interest-only mortgage, you’re probably braced for an impact on your income, but read through our buy-to-let tax changes explained report for more information.
Bear in mind too that the phased approach is likely to knock many landlords into the higher-rate taxpayer bracket. Checking where you stand now could avoid any nasty shocks when sorting out your tax return.
2. Capital Gains Tax rates
As covered in our recent 2018 self-employed tax changes report, there’s been an increase in the Capital Gains Tax allowance, to £11,700 for 2018-19. But remember, there are higher Capital Gains Tax rates on profits above that allowance for buy-to-let investors or those with a second home.
The rate for selling your second property is 18 per cent for basic-rate taxpayers and 28 per cent for additional-rate taxpayers.
3. New energy efficiency measures
Aside from tax, April also sees new energy regulations for landlords, and you’ll need any new tenancies or renewed contracts to carry at least an E rating on the Energy Performance Certificate.
This regulation will roll out across all tenancies in the next two years, with fines of up to £4,000 for non-compliance.
That rounds up 2018’s buy-to-let tax changes so far, but landlords can expect more news and shifts throughout the tax year. Stay up-to-date with our monthly newsletter, for all the latest buy-to-let tax news.