More Tax Changes Affecting Buy-To-Let Landlords

HMRC have partially removed the amount of mortgage interest on which buy-to-let landlords can claim full tax deductions from rental payments. This will likely increase their tax bills ...

The lesser-known change is that individual landlords must now use a 'cash basis' to work out their income unless it is more than £150,000 a year or they are companies or partnerships.

This is because they receive a regular monthly rental income, so to all intents and purposes, they're already using a cash basis for their property income. The issue raises its head when tenants pay in advance, say 6 months at a time.

Under the new rules, the entire payment must be accounted for in the period it was received, rather than being spread across the entire term of the tenancy. Usually, the individual landlord would pay the same amount of tax, it's just all consolidated into one period now.

There are possibilities that the landlord can opt-out under certain conditions and the adjustment can be spread over a number of years so it shouldn't be that painful a transition to the new rules, but many will likely just pay the tax when it's due because it's much simpler.

However, on the flip-side, the same now applies to expenses too. There will no longer be a requirement to spread service charges, commissions and maintenance fees across a tenancy, so they can be claimed back in the period they were paid to offset the additional cash basis accounting for the rental incomes.

If you're concerned about these changes and how you need to account for them, do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.

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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.

More Tax Changes Affecting Buy-To-Let Landlords

About the new cash accounting rules ...