November 04, 2016
When acting as a landlord it’s vital you let HMRC know, or you may face a large penalty…
When setting up as a landlord for the first time you need to consider whether or not you are liable to pay income tax. All profit you receive from letting your property is classed as income and must be declared to HMRC. If you fail to notify HMRC of your role as a landlord, you may have to pay large fines.
This all depends on the amount of profit you make, but you can take deductions from your income which will lower the level of taxable income, saving you money. If you earn up to £31,785 in a year you’ll be required to pay 20% tax. If you earn between £31,786 and £150,000 you’ll be required to pay 40% tax. If you earn £150,001 and above, you’ll be required to pay 45% tax.
Last year, it was announced that changes would be made to mortgage interest rate relief. Jezzards have run through the changes over on their blog:
“Landlords who would have been on the higher and the top rate of tax will no longer receive the full relief that they used to receive. This will be phased in with the changes coming in as follows:
For 2017/18, deductions from property income will be limited at 75% of finance costs, while 25% will be made available at the basic rate.
For 2018/19, deductions from property income will be limited at 50% of finance costs, while 50% will be made available at the basic rate.
For 2019/20, deductions from property income will be limited at 50% of finance costs, while 50% will be made available at the basic rate.
From 2020/21, all of the deductions from property income will be provided at the basic rate of tax reduction.”
For more information on changes to tax relief and stamp duty, head over to the Jezzards website.