Tax Changes Tring Landlords Need To Know For 2020

As of April 2020, landlords can no longer deduct any of their mortgage expenses from rental income, instead receiving a tax credit, which is based on 20% of their mortgage interest payments.

It is believed many buy-to-let landlords will be negatively affected by this change through higher tax bills. Given 2020 is shaping up to be the most challenging year landlords have experienced, this change is another issue that many professionals can do without.

Some landlords have been badly affected by this latest change

Most affected will be landlords in the higher and additional rate as they will no longer receive all the tax back on their mortgage payments. Also, landlords now need to declare the income they use to pay their mortgage in their tax returns. This could see some landlords placed into a higher tax bracket, which will cause further problems for the industry.

There were calls from the NRLA to delay the final part of the loss of tax relief to minimise the impact on landlords. A joint statement was issued, saying; “To support landlords in this we are calling for a package of measures from government and mortgage providers. This includes a temporary scrapping of the five week wait before Universal Credit claimants get their first payment, pausing the final phase of restricting mortgage interest relief to the basic rate of income tax and ensuring lenders look sympathetically on requests by landlords for mortgage payment holidays where their income is being affected through reduced or non-payment of rent.”

Capital gains tax bills must be paid within 30 days

Landlords should also note there has been a significant change to how capital gains tax bills are dealt with. As of April 2020, these bills need to paid within 30 days of the sale concluding. This is a big change from the previous system, which required landlords to pay this bill alongside their tax bill for the relevant year.

This change means landlords must pay a higher sum of money up-front, which might cause some problems for landlords. Selling property is often expensive, which means landlords have a lot of bills to take care of in the aftermath of selling property.

While there is no change to the amount of money a landlord must pay, the change in timing is unwelcome for many.

Rachael Griffin, tax and financial planning expert at Quilter, spoke about this new 30-day deadline and how it doesn’t provide landlords with much time. Rachael said; “For those who own more than one property they will need to ensure they are prepared for any liquidity issues that may subsequently appear following the reduction in the time to pay the charge. People selling a house need to make sure they have taken into account all the fees and charges they have to pay to estate agents, solicitors and the like, in order to have enough left over to pay this tax.”

Rachael continued by saying; “Additionally, it could have the impact of making reinvestment of the sale proceeds more difficult as this money now needs to be earmarked for the tax charge, rather than worry about it in over a year’s time.”

We know this is a challenging time, and for many people, the thought of letting property is a challenging one. However, if you are a landlord in Tring, we are here to help. If we can be of any use to you, please contact Harpers Estates, and we will be more than happy to assist you.